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Our Top 10 Pension Q&A

And kicking of this series, in at No. 10 is Timing of Retirement

Q: I have just been promoted to WO2. I am on AFPS15 with legacy rights from AFPS 75. My RAO tells me that I need to serve for 2 more years to get the full effect of my promotion reflected in my AFPS 75 benefits. However, the online calculator seems to give me full WO2 benefits if I leave as soon as 6 months after my promotion. Who is right please?

A: Your RAO is correct. Unfortunately the online calculator, whilst excellent in most respects, does assume that if you input a rank of WO2 that you will automatically qualify for AFPS 75 benefits based upon that rank irrespective of how long you have been in the higher rank. You have to serve for a minimum of 2 years, in your final 5 years of service, in the paid higher rank to get your AFPS 75 benefits based upon WO2 rates.

Q: I have heard that there is a best time of year to leave service, is this true?

A: This rather depends upon the pension scheme(s) that will be providing your benefits:-

AFPS75 – Subject to the need to serve long enough to get an immediate pension, based upon your highest rank, it is often better to ensure that your last day in service is post April 1st as opposed to January through March in any calendar year. This is because AFPS75 benefits for ranks below 2* are based upon a representative rates of pay, and by convention these are reviewed in line with AFPRB awards wef 1st April each year. Consequently if your last day in service is mid-March, then you will be leaving on the rates of pay agreed in the previous year, whereas if you wait until April you will leave with the very latest rates of pay. (Does not always work, of course as in years when there are no pay rises there is no advantage). For Officers it is always best to try to leave at the end of a commission or at an “option point” so that you can secure exit on compulsory terms rather than Premature Voluntary Retirement (PVR) terms.

AFPS05 and AFPS15 – Here benefits are based upon actual rates of pay, rather than representative rates so the main timing of retirement issues are around Early Departure Payment (EDP) qualification points. Once you have met your 18/40 and/or 20/40 points (so more than 18 (20) years of service and age at least 40 on exit), the refinements are more nuanced. Every calendar year that you serve beyond your 18/40 point sees your AFPS05 EDP income increase by 1.66% of your deferred pension, whereas each calendar year beyond your 20/40 point will see your AFPS15 EDP income raised by 0.85% of your deferred AFPS15 pension. Consequently if your intended last day in service is around the anniversary of your 18/40 and/or 20/40 qualification date, it might be worth waiting to secure the modest uplift in annual EDP income that serving beyond this anniversary brings.  

The general rule for all schemes, unsurprisingly, is that the longer you serve the better your benefits, but it is worth exploring the differences between possible exit dates before you submit your notice to terminate.

Check back tomorrow for No. 9 – Added Pension

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