The military have always provided excellent benefits to those in their service, and rightly so. A Military pension is paid into by the Army on the behalf of its recruits, and can be drawn at 65. The scheme has always been solid (aside from a few notable exceptions relating to individuals), but should anybody with a military pension wish for early access to their funds for any reason, it’s not going to happen.
Many would argue that the fact the scheme does not require a contribution from the employee opens it up to restrictions that would never be placed on contributed funds, however this argument falls apart when it’s given from behind the safety of a laptop while its subjects are on the front line in the Middle East.
While the pension scheme put in place for the military is relatively secure in comparison to other areas of the public sector, it can still be subject to austerity measures. There is the danger that the retirement age could be extended, while benefits may well be cut further as the public sector deficit grows.
Benefits Cuts
The pension schemes in place across the public sector have already had the level of benefits cut as the indexation was shifted from the Retail Price Index to the lower percentile represented by the Consumer Price Index. This has stunted growth in public sector schemes, and although the year on year decrease is small, over the course if an extended period the difference can be substantial.
Having served in the Army, many look to foreign shores for their retirement plans. Retiring abroad is becoming increasingly popular among retired individuals throughout Britain (not just in the Army) as the climate, a slower pace of life – and the fact that Britain seems to lose a further aspect of its identity as each day passes – all become important considerations.
Doors are Closing
For those holding out for a move abroad, there is still an option to take an Army pension with you. This option, however, is soon to be removed. As of April 2015 no military pensions will be allowed to be transferred, meaning they are locked into the UK for good. With austerity measures punishing other areas of the public sector, this has left ex-servicemen and women worried about exactly what could happen to their retirement funds moving forward.
For the next six months, the option is there to place funds in a QROPS. These schemes are run by the HMRC and are essentially pension funds which operate overseas. There are over 3,000 schemes available in 42 jurisdictions worldwide, all offering slightly different options and benefits.
QROPS Providers have been reporting large numbers of enquiries from the public sector due to the upcoming legislation changes which mean that this option will be gone for good, and it seems that many current and former employees are keen to see what their options are while they still can.
A QROPS can offer benefits such as:
Stability in a non-deficit fund
Up to 30% lump sum tax-free (potentially changing to 100% in April)
Choice of currency (avoiding fluctuations in exchange rates)
Full investment flexibility
Retirement at 55
Death benefits
While for some a QROPS may not be the answer, for those already residing abroad or planning to, the time is now to make the enquiry. Advice should always be taken on a QROPS transfer from a fully qualified professional. A variety of options should be presented with serious financial projections. One of the main reasons people go through with a QROPS transfer is because of the uncertainty surrounding anything left in the UK, it is important that uncertainty is kept away from retirement.
