Defence IssuesCOMPARISONS BETWEEN AFPS 75 AND AFPS 05
| BENEFIT | AFPS 75 | AFPS 05 |
|---|---|---|
| Funding Structure | Unfunded and non-contributory | Unfunded and non-contributory |
| Overall Scheme Design | Defined benefit based on representative pay 1 | Defined benefit based on final pensionable pay 2 |
| Value against current Inland Revenue limit of 66.67% | 62.5% | 62.5% at 35 years, with scope to earn additional benefits up to 40 years |
| When do pension benefits start to build up? | From age 21 for officers and from age 18 for other ranks or date of joining if later | First day of paid Service in the Armed Forces for both officers and other ranks regardless of age |
| Specialist Pay | Not pensionable | Not pensionable |
| Normal Retiring Age | Age 55 | Age 55 |
| What is the maximum number of years’ service that can count towards my pension? | 34 years for officers and 37 years for other ranks | 40 years for both officers and other ranks |
| Accrual Rate | Uneven accrual rate – faster for officers up to Immediate Pension Point (IPP) | Even accrual rate at 1/70th of pensionable earnings for each year of service |
| Pension increases once in payment | Retail prices Index (RPI): Invaliding pension – on payment Immediate Pension – from age 55 Preserved Pension – on payment | RPI increases: Ill-health pension – on payment Early Departure Payments – from age 55 Preserved Pension – on payment |
| What do I get if I leave before the Immediate Pension Point (IPP) or Early Departure Payments (EDP) Point? | Preserved pension paid from age 60 (but will be age 65 for service after 6 April 2006) with a tax-free lump sum worth three times pension | Preserved pension paid from age 65 with a tax-free lump sum worth three times pension |
| Resettlement Grants | Officers – £12,709 after 9 years’ service Other Ranks - £8,687 after 12 years’ service | For both officers and other ranks £9,000 after 12 years’ service |
| What are the arrangements for Medical and Dental Officers? | Receive IP if leave at or after IPP. Pension based on representative pay | Receive bonuses on transfer to next commission, with a five-year return of service. EDP not normally payable. Pension based on final pensionable pay |
| What is the earliest age I can receive an income on leaving Service? | IP paid at age 37 and after 16 years for officers (RAF is age 38) and age 40 and after 22 years for other ranks. Level of IP set at full pension value. A tax-free lump sum worth three times annual pension is also payable | Have to serve 18 years AND reach at least age 40 for both officers 3 and other ranks to receive an EDP of a tax-free lump sum worth three times pension and income worth at least half preserved pension. |
| Is commutation possible on leaving the Armed Forces? | Yes. Resettlement commutation at IPP, giving a larger lump sum and reduced IP which is restored at age 55. Life commutation possible for eligible members | No resettlement commutation available but there is the option of inverse commutation (reducing the tax-free pension lump sum payable at age 65 to increase taxable pension) |
| Non-attributable ill-health benefits | Service Invaliding Pension plus tax-free terminal grant of three times pension. Level of pension based on length of service and normally enhanced (if served longer than 5 years) | 3 tier system dependent on seriousness of disability: Tier 1 4 – Tax-free lump sum related to salary and number of years served. Tier 2 5 – pension enhanced by one-third of remaining service to age 55 plus tax-free lump sum of three times pension. Tier 3 6- pension enhanced by half of remaining service to age 55 (with minimum pension based on 20 years’ service) plus tax-free lump sum of three times pension |
| How much is the lump sum if I die in Service? | A tax-free lump sum of about 3 times pay | A tax-free lump sum of four times pensionable pay |
| What pension would my spouse receive on my death (not due to service)? | Normally 50% of your pension but ceases on cohabitation or remarriage. Short term pension payable at level of your earnings up to 9 months | Up to 62.5% of your pension paid for life. No short term pension. |
| Is my partner 7 entitled to a pension? | No (unless death was due to Service) | Yes, if evidence of a substantial relationship with you at time of death |
| Will my civil partner be entitled to a pension? | Yes, but only for your service from April 1988 | Yes, but only for your service from April 1988 |
| Children’s pensions | Children’s pensions payable but not to children of post-retirement marriages | To include pensions for children born after leaving the Armed Forces |
| Additional Voluntary Contributions (AVCs) | Defined benefit arrangement to increase death-in-service lump sum, widow’s pension or purchase added years and money purchase arrangement to top up AFPS benefits | Opportunity to buy in-scheme added years. AVCs available from commercial sources. |
1 All those of the same rank with the same length of service retiring in the same year receive the same rate of pension, regardless of their actual earnings.
2 Greatest amount of pensionable earnings (excluding allowances and any form of special pay) received for 365 consecutive days over the last three years of service.
3 Excluding MOs/DOs as they are not normally eligible to receive an EDP.
4 Tier 1 – for those with a condition that is not deemed to significantly impair their ability to get gainful employment in civilian life.
5 Tier 2 – for those with a condition that is deemed to significantly impair their ability to get gainful employment in civilian life, but are not permanently incapable of employment.
6 Tier 3 – for those who have a serious disability which is deemed to leave them permanently incapable of any further full-time employment.
7 An eligible partner is someone (same sex or otherwise) with whom an individual has an established and exclusive relationship of dependence or interdependence.
Last Updated: 8 Apr 05