FREQUENTLY ASKED QUESTIONS

No. Life commutation is not available under AFPS 05. Reserved rights for this remain in AFPS 75 only. If you decide to transfer to AFPS 05 you cannot opt for life or resettlement commutation even if you were eligible for this in AFPS 75. If you feel you need a life commutation assessment before you make your transfer decision, you should contact AFPAA(Glasgow) and not the OTT Service Centre.

Can former members of the Services transfer their benefits to the new scheme?

No. Only those members of the Armed Forces who are serving on 6 April 2006 will have the option to transfer to AFPS 05.

I am seconded to NETMA. Are there any differences between AFPS 75 and AFPS 05 for when I return to the Armed Forces? (new question 28/10/05)

If you are a member of AFPS 05 when you return from NETMA and want to buy reckonable service for the time seconded you will have to pay the whole of your refund of contributions from the NETMA Scheme to cover it. If you are in the same circumstances but elect to stay in AFPS 75 you will only have to pay the refunded employer’s contributions.

Will there be any change in the Cash Equivalent Transfer Value (CETV) of my pension scheme benefits if I transfer to AFPS 05? (new question 28/10/05)

Yes, as the benefits paid under AFPS 05 are different from those paid under AFPS 75. You may therefore want to consider carefully how the deferred benefits of AFPS 05 compare to those in AFPS 75 when making your decision about transferring, bearing in mind the different deferred pension ages of 65 in AFPS 05 and 60 in AFPS 75 for service up to and including 5 April 2006.

PENSIONS CALCULATOR

Why doesn't the calculator give me the same result as my Personal Benefit Statement (PBS)? (new question 28/10/05)

The calculator will only show your pension benefits under each scheme based on whole years and will not include days of reckonable service. It also rounds down in years so, 3 years and 200 days will be calculated as 3 years. If you input the same data as on your PBS you will get similar figures, but the calculator will always be lower than the PBS.

How can I get the best out of the calculator? (new question 28/10/05)

Your PBS will show you leaving at one of three points:

• either with a preserved pension (before the IPP),
• an IP or

If you are thinking of leaving at a different point from that which is shown on your PBS, or think you might get promoted before you leave, or be on a different pay level, then the calculator will allow you to input different data from your PBS.

Can everybody use the calculator? (new question 28/10/05)

No. We were unable to cater for all personnel, so for some groups, eg MPGS and Reserve Forces, the calculator is unable to do calculations.

PENSION BENEFITS

[See "AFPS 05 – Your Pension Scheme Explained" booklet – MMP/124]

In what circumstances in AFPS 05 might my spouse, civil partner or partner not receive 62.5% of my pension benefits if I die?

There are two circumstances where this might happen:

Will those on enhanced pay spines, ie medical/dental officers and Professional Aviators, receive a pension based on their individual pensionable pay rate?

Yes. All pensionable pay will be used when calculating the final pensionable salary. However, specialist pay which is not part of the pay spine and allowances are not pensionable.

My retirement age is different from the normal pension age of 55. How does this affect me?

As now, retirement ages will continue to be tied to Service career structures. You will receive your pension at the retirement age to which you have agreed, but not before age 55.

If my retirement age is age 60 but I have only done 16 years’ service, will I be entitled to an EDP?

No. As you have passed the normal retirement age of 55 you will receive a pension on leaving service and not an EDP.

If I ‘act up’ or receive substitution pay in my last 3 years of service, how is the higher pay treated for pension purposes?

Under AFPS 05, the pension is based on the highest pensionable pay figure earned over any consecutive 365 days period in the last 3 years of service. In most cases, this will be in the last 12 months before departure. However, any pensionable pay earned by ‘acting up’ or by substitution in the last 3 years will count and may mean that an earlier 365 day period gives a higher pensionable pay figure. This approach compares with that under AFPS 75 where the higher rank has to be held or covered for two years, if the pay is to count for pension purposes.

If I transfer from AFPS 75 to AFPS 05, can I also transfer benefits from another pension scheme? (updated 28/10/05)

You can transfer benefits from another public service pension scheme up to one year after joining AFPS 05. If you leave at the normal retirement age of 55, you can transfer in private pension scheme benefits up to one year before you retire. If you leave before the normal retirement age, you must apply one year before the preserved pension is payable (ie age 64).

EARLY DEPARTURE PAYMENTS (EDP) SCHEME

[See "AFPS 05 – Your Pension Scheme Explained" booklet – MMP/124]

What payments do I receive under the EDP scheme? (updated 28/10/05)

If you leave at or after the EDP 18/40 Point (but before age 55), you get a tax-free EDP lump sum of three times your preserved pension and an income of at least 50% of your preserved pension. The income is not subject to National Insurance contributions but is taxable.

What is the difference between EDP under AFPS 05 and the Immediate Pension (IP) under AFPS 75? (updated 28/10/05)

EDP is payable after 18 years’ reckonable service AND reaching the age of 40; IP is payable after 16 years’ reckonable service from age 21 as an officer or 22 years’ reckonable service from age 18 as an other rank. The income paid at the EDP 18/40 Point is worth 50% of the value of the preserved pension. The income paid at the IP Point is worth 100% of the value of the pension. The tax-free lump sums under both schemes payable on leaving are worth three times the value of the annual preserved pension. But, of course, if you leave with an EDP you will get two lump sums, one paid when you leave and another at age 65.

What if I complete an extra year’s service beyond the EDP 18/40 point?

The EDP increases by 1.6667% of preserved pension for each complete year of service past the EDP 18/40 Point. If you complete five years’ service after the EDP 18/40 Point, therefore, you will get an income worth 50% + (5 x 1.6667%) = 58.3335% of your preserved pension.

If I have 18 years’ service at age 38 but continue serving until age 40 will I get 2 years "credit" added to my EDP income? (updated 28/10/05)

No. The EDP 18/40 Point requires two criteria to be met – at least 18 years’ service AND at least age 40 – so in this example the EDP 18/40 Point does not occur until 20 years’ service are completed because this is when you reach age 40. However, the EDP income of 50% uses preserved pension which is based on 20 years’ (not 18 years’) service.

As an officer, if I transfer to AFPS 05 my length of commission is less than 18 years. Is anything being done about this?

Yes. Officers on an Intermediate Term Commission (16 years) who transfer to AFPS 05 with a commission of less than 18 years will be able to extend in service, so as to reach the EDP 18/40 Point.

My commission/engagement ends at age 53. Will I receive a pension if I leave at this age?

No. You will get EDP provided you have completed 18 years’ service. At age 65, the EDP income stops and the preserved pension and tax-free pension lump sum are payable.

What service counts towards the EDP 18/40 point? (updated 28/10/05)

Paid service under AFPS 05 plus any service while on secondment with a NATO/UN or similar organisation where you buy back the service missed or secondment to industry where the civilian employer pays the necessary contribution to AFPS 05. Previous service in AFPS 75 transferred into AFPS 05 also counts as qualifying service for EDP. However, service transferred in from any other pension scheme does not count nor does the purchase of added years, although it will, of course, increase the value of your preserved pension and hence the value of your EDP income.

If I leave Service at age 55, do I receive an EDP lump sum of 3 times pension and my pension lump sum at age 55?

No. If you are in Service at age 55, you get your pension, including the tax-free lump sum of 3 times pension. EDP is paid only to those leaving Service before the normal retirement age of 55 who are age 40 or older with at least 18 years’ service.

If I am in receipt of EDP, am I prevented from receiving my preserved pension early? (updated 28/10/05)

You can receive your preserved pension and pension lump sum at any time after age 55, subject to actuarial reduction, without it affecting your EDP. If your health is poor and you are unable to work full-time, you can apply to have your preserved pension early without actuarial reduction. Your EDP will remain unaffected.

If I am in receipt of EDP, do I still need to claim my preserved pension? (updated 28/10/05)

No, your preserved pension will start automatically when your EDP stops. However, if you are not in receipt of your EDP, you will still need to claim your preserved pension, if you are entitled to one. You should ensure that you submit your claim to AFPAA at least 6 months before your preserved pension is due to be paid to ensure that your pension starts on time.

What guarantee is there that my EDP will remain in accordance with the rules as currently laid out and not change in the future? (updated 22/09/05)

When you leave the Armed Forces you will leave with the benefits that were in place when you joined the pension scheme. Any future changes to the EDP structure will only affect new entrants after the change is implemented.

ILL-HEALTH

[See "Ill-Health Benefits" booklet – MMP/127]

Under AFPS 05, some personnel who are medically retired will not receive a pension immediately. What will they get?

Personnel who have at least two years’ service, are medically discharged and have a condition not deemed to significantly impair their ability to get gainful employment, will receive a lump sum related to their salary and the number of years they have served, to help them adjust to their new circumstances. No ill-health pension will be payable, but they will get a preserved pension at age 65. However, if they leave with sufficient service (at least 18 years and with a minimum age of 40) they will receive EDP and a preserved pension at the age of 65, rather than the ill-health lump sum.

ADDITIONAL VOLUNTARY CONTRIBUTIONS AND ADDED YEARS

I am contributing to an AVC (other than to increase death-in-service) under AFPS 75 (or buying added years of service). If I transfer to AFPS 05, what happens to the contributions I have made?

The scheme actuary will calculate the value of your past contributions in terms of additional reckonable service and add the figure to your reckonable service to be transferred. However, you cannot transfer more than 35 years’ service into AFPS 05.

Will I be credited additional reckonable service on transfer for headroom AVCs? (new question 28/10/05)

If your pay is above the representative rate of pay on 6 Apr 06 you will be credited with additional reckonable service. However, if your pay is below this rate at the point of transfer no additional service will be credited. Rates are published annually and available on the intranet.

I am buying a death-in-service (DIS) lump sum of four times representative pay in AFPS 75. What should I do from 6 April 2005?

Between 6 April 2005 and 5 April 2006 you will not pay premiums, as a four times DIS lump sum is available under transitional arrangements, whereby AFPAA will calculate dependants’ benefits on both AFPS 75 and AFPS 05 arrangements and give the better outcome to the family. See DIB 2005/19.

How do I ensure my DIS AVC premiums are suspended? (updated 28/10/05)

AFPAA will complete the exercise to stop all DIS AVC premiums in November and give a refund of premiums paid from April 2005. You should contact AFPAA(G) if your payments do not stop.

If I decide to stay in AFPS 75 and had a DIS AVC which was stopped, what are my choices from 6 April 2006? (updated 28/10/05)

The DIS lump sum in AFPS 75 increased to three times representative pay for deaths on or after 6 April 2005. If you decide to stay in AFPS 75 and want to continue to buy a four times DIS lump sum benefit, you will need to apply to AFPAA to start a new contract. You will pay one-third of your original payment, as you will be buying one-third of the extra benefit you originally contracted to buy. You should advise AFPAA of your decision by 1 March 2006. Exceptionally, you will also be allowed to stop the contract if you decide you do not want to continue to pay for a DIS AVC.

What if I transfer to AFPS 05? (updated 28/10/05)

If you transfer to AFPS 05 from 6 April 2006, your DIS premiums will cease, but you will not receive anything for your past premiums, as you have had the benefit of "cover" for your service, a bit like an insurance premium.

What happens to my added years contract if I decide to transfer to AFPS 05?

It will stop and you will be credited with additional reckonable service proportionate to the premiums paid. If you want to continue buying added years, you will be able to start a new contract under AFPS 05, with new premiums based on rates equivalent to those paid before transfer.

SPOUSE/PARTNER/CIVIL PARTNER

[See "Family Pension Benefits" booklet – MMP/126]

I have a partner and children.  Will either pension scheme provide benefits for my partner if I die? (updated 28/10/05)

AFPS 05 gives benefits to eligible partners (ie those in a substantial relationship). No benefits are paid to partners in AFPS 75, unless the death or injury is due to service. You can find out more about partner eligibility in DCI JS 3/04.

If I die after leaving service but before I get my preserved pension, what happens to my pension lump sum? (updated 28/10/05)

The tax-free lump sum of three times pension is paid to the spouse or partner, unless you have nominated someone else. If neither exists, it is paid to the estate. This is also paid if you die whilst in receipt of EDP. The lump sum is increased by inflation since you left service.

I have a same-sex partner and we intend to register our partnership under the Civil Partnership Act (CPA) 2004 once the scheme is introduced.  How might this affect my partner’s pension benefits if I die? (updated 28/10/05)

Under the CPA 2004, pension schemes will be required to provide benefits to a civil partner in the same way spouses receive benefits.

What about children? (updated 28/10/05)

Children are covered similarly in both schemes, except that in AFPS 75 children born of post-retirement marriages are not entitled to benefits, whereas under AFPS 05 they are.

DIVORCE

[See "Pension Benefits on Divorce" booklet – MMP/131]

Do I have to consult my ex-spouse before making an OTT decision? (updated 28/10/05)

When a Pension Sharing Order (PSO) is made, the financial value of the order at the time of the divorce is annotated on your file and, when the pension finally becomes payable, this sum is increased in line with pension increases and deducted from the pension which would otherwise be payable.  This means that there is a clean break and that you are free to opt to change schemes or opt out altogether should you so wish.

Note that your Personal Benefit Statements will not show the effect of the PSO on your final pension, so you will need to be alert to this.

Because the preserved pension age in AFPS 05 is higher than the current preserved pension age in AFPS 75, coupled with the absence of the IP in AFPS 05, there could be serious disadvantages to those with PSOs in transferring. You are strongly advised to ask the OTT Service Centre for an illustration. The amount awarded to your ex-spouse is held completely separately – indeed, he or she becomes what is called a Pension Credit Member and this means that they are a member of the pension scheme in their own right.  The pension is payable when your ex-spouse is 60 or 65 depending upon when the divorce occurred and which scheme you belonged to.  Pension Credit Members will not be given the OTT and they are not permitted to transfer or add to the pension held for them.

If I am half way between divorce proceedings and dealing with difficult solicitors, what approach should I take? (updated 28/10/05)

During the transitional year AFPAA have been advised to give transfer value information in the case of divorcing couples based on the scheme that the member was actually in. We would, of course, expect that you would be open about the OTT with your own representative and we would counsel caution because of the impact of AFPS 05 rules (see above).

If I am subject to a pension sharing agreement under AFPS 75, can I transfer to AFPS 05? If so, how will the percentage be deducted? (updated 28/10/05)

When a PSO is made, the agreed sum is annotated on the Pension Debit Member’s file and a new account opened for the Pension Credit Member. In other words, they become a member in their own right, and the Pension Debit Member is free to do whatever he or she likes in relation to their pension arrangements (see above).

Can you give me a forecast of my pension less my Pension Sharing Order (PSO)? (updated 05/12/05)

Not accurately, as this depends on how long after the PSO was made that your pension comes into payment. The longer the delay and therefore the shorter the period over which your pension is paid, the larger will be the reduction to the value of your pension. This is because the pension debit (that is the share of your pension given by the PSO to your ex-spouse) has to be increased in value by a formula (laid down by law) to ensure that the full amount of the sum awarded by the PSO is recovered from you before you die (assumed for this purpose to be about age 76). When the PSO was made, its value was calculated and annotated on your file. That value was credited to your ex-spouse’s account to be held until he/she is age 60 (because that was the preserved pension age for AFPS 75 at the time of your divorce). AFPAA (Glasgow) should be asked for an illustration of the impact by those affected (tel no 0141 224 3600 or 94561 3600).

I have a Pension Sharing Order against my pension. Will my EDP be based on my pension before or after the pension share is deducted? (updated 28/10/05)

Your EDP will be based on your preserved pension before the deduction of the pension share.

RE-EMPLOYMENT

[See "Re-employment" booklet – MMP/116]

I intend to leave at the Immediate Pension (IP) Point in AFPS 75. If, later, I were to rejoin the Regulars or join FTRS, what would happen to my IP and lump sum? (updated 28/10/05)

Your IP may be reduced on re-employment to ensure that your new salary plus your pension do not together exceed your salary at departure. This is the usual abatement rule in public service pension schemes. Your IP lump sum is not affected.

What about the EDP?

The EDP is not a pension. If you are re-employed, your EDP income will stop for the duration of your engagement and restart at the same level when you leave service, if your discharge is not on medical grounds and it is before age 55. If you are age 55 or more when you leave and you have been in Regular service, you will receive your pension instead, which otherwise will be preserved to age 65. If you are in the FTRS, the EDP income resumes at 75% of preserved pension, together with inflation increases since your original departure from regular service. You will have to repay any "unexpired" proportion of the EDP lump sum. For example, if the lump sum was worth nine months’ pay when you left the Armed Forces and the new engagement starts six months later, you will have to repay a sum equivalent to three months of the original lump sum. Further Regular service could lead to the assessment of a revised EDP lump sum on later departure providing you leave before age 55, but the new lump sum would be reduced by the amount you did not repay. However, service in the FTRS does not qualify for EDP, so any repayment would be lost permanently.

If I am re-employed after receiving an IP and Terminal Grant would my lump sum on finally leaving service be affected? (new question 18/08/05)

Your new service stands alone because you have already received your IP and Terminal Grant. The pension lump sum you would receive on finally leaving the Armed Forces would only be in respect of the re-employed service. If you leave before the normal retirement age of 55 the benefits for the re-employed service would be payable at the preserved pension age of 65.

If I have been paid my terminal grant under AFPS 75, but am continuing in the Armed Forces, am I allowed to take this service with me into AFPS 05? (new question 18/08/05)

No, as you are drawing pension benefits for this service.

REDUNDANCY

[See DIN 02-093]

What are the redundancy terms? (updated 28/10/05)

The existing terms will continue for AFPS 75 members for the duration of the current drawdown which is due to complete by 31 March 2008. These terms will then be replaced by less generous terms, which are expected to be broadly comparable with the new AFPS 05 terms up to the mid-career break point, but, generally, significantly more valuable thereafter, though the gap will narrow as the normal retirement age is approached. Those made redundant before 31 March 2008 but after they have elected to transfer will have the opportunity to revert to membership of AFPS 75 to take advantage of the existing provisions.

If I am selected for redundancy under the current round of redundancies, but have opted to transfer to AFPS 05, must I return to AFPS 75 to take advantage of the higher redundancy benefits? (updated 28/10/05)

Yes. You will need to return to AFPS 75 to take advantage of the higher redundancy benefits, but you will then not be eligible for AFPS 05 benefits. However, redundancy compensation is only one element of the range of benefits offered under the two pension schemes and therefore should not be viewed in isolation, but as part of a total package.

Why are the redundancy compensation provisions not the same for both AFPS 75 and AFPS 05? (updated 28/10/05)

The redundancy provisions are different as they are designed to support two very different pension schemes. The 2005 terms also reflect changes across the public sector on redundancy policies. The main reason for the difference is due to the lower value of EDP when compared with the IP payable under AFPS 75.

What happens if I am made redundant from April 2008?

New arrangements will be put in place for members of both schemes. AFPS 75 benefits are generally expected to remain more valuable than those relating to AFPS 05 members, particularly for those made redundant between the IP/EDP points and the mid-40s.

If I have exercised my option to transfer to AFPS 05 before I am informed that I am to be compulsorily retired on Direct Early Retirement (DER) terms, will I be given the opportunity to review my decision? (updated 28/10/05)

Senior officers of one-star above whose early exit has been agreed under DER will have access to the redundancy compensation terms as set out in DIN 02-093. DER is used in exceptional circumstances. Each case is considered on its merits by the Services’ Central Severance Panel. Anyone selected for DER after they have elected to transfer to AFPS 05 will have the opportunity to review their decision and revert back to AFPS 75 provided their last day of service is before 1 April 2008. Once someone reverts back to AFPS 75 they will only be eligible to benefits under that scheme. Senior officers whose last day of service is on or after 1 April 2008 will not be given the opportunity to revert back to AFPS 75.

GENERAL

The Government is consulting civil service and NHS staff about changing their pension scheme from final salary to career average earnings. What guarantee is there that the terms of AFPS 05 will not be made less generous in the future or pension age will change? (updated 22/09/05)

AFPS 05 and AFPS 75 are subject to pensions and tax legislation, and public sector pensions policy. The terms of AFPS 05 have been agreed with the Treasury and the Inland Revenue. The rules are set out in legislation which has been approved by Parliament; future changes will likewise need Parliamentary approval. In addition, the Armed Forces Pay Review Body has agreed to look critically at AFPS 05 at least every five years and to draw the MOD’s attention to areas in which it falls short of wider industry good practice. The first such review will be in 2010, with the results published in 2011.

If I was seconded to NATO and a member of the NATO Pension Scheme, what are my options on return to the British Armed Forces? (new question 22/09/05)

The NATO Pension Scheme will give you a single tax-free lump sum if you leave without building up 5 years’ reckonable service. The size of the lump sum will depend on the stock market. You can either keep this sum or the whole amount can be given a Cash Equivalent Transfer Value (CETV) and used to buy additional reckonable service to make up for the period you were out of the scheme.

Who can I contact for further information? (new question 28/10/05)

In the first instance you should contact your unit admin office. Alternative contacts are as follows:

• Queries on OTT, PBS etc – the OTT Service Centre – email "AFPAA OTT Service Centre".
• Personal specific questions relating to all schemes including pension sharing orders and life commutation estimates – AFPAA (Glasgow) – email "afpaa-pensions-div@dial.pipex.com"
• Policy questions on AFPS 05 and RFPS – SP Pol Pensions – email "SPPol Pensions-NewAFPSPol-Office"

PENSION AGE

Is there a change in pension age in public service schemes? (new question 28/10/05)

The Government’s long term aim is that public service pension schemes should introduce a pension age of 65 as soon as possible. New entrants to most public sector jobs are, therefore, now on, or will soon be on, arrangements which do not pay a pension before age 65, although there will be provision for members to pay higher contributions during service and leave before that age. The Armed Forces remain an exception to this as, along with the Police and Fires Services, they already have an earlier normal pension age of 55, which MOD argued strongly to the Treasury continued to be justified in the new AFPS 05.

What has the Government agreed? (new question 28/10/05)

On 18 October 2005, the Government announced an agreement with the trades unions (TUs) representing civil service, NHS and teaching staff that they should discuss with respective sector employers how to secure savings equal to 2% of the paybill, in return for which they would be allowed to add back 1% of the paybill into scheme improvements.  It is down to individual schemes and the TUs to decide (by June 2006) how to find the savings and what improvements to make. Both parties might agree, for example, not to change the normal pension age of 60 for existing staff. However, if they were to do this, it would leave less scope to improve scheme benefits.

Why is the preserved pension age in AFPS 75 for existing members of the Armed Forces being changed to age 65 for service from 6 April 2006? (new question 28/10/05)

This change was announced in Defence Internal Brief 19/05 on 7 April 2005. Service up to and including 5 April 2006 will continue to earn benefits paid from age 60. However, service from 6 April 2006 will earn benefits payable from age 65 but provision will be made to allow members to choose to receive this element of their pension at age 60 on an actuarially reduced basis. The argument for making this change was strong, especially as the Treasury allowed MOD to use half the savings from the change to increase the death in service lump sum to three times representative pay. The Government has made clear the need to contain the long-term increase in the cost of pensions for the Armed Forces, arising from pensioners living longer. With the full support of the Chiefs of Staff, MOD decided that this burden should be shared between existing and new personnel.

MPGS

Why doesn’t my PBS show my Regular service prior to joining MPGS?

Very often service prior to joining the MPGS is in a rank higher than the new MPGS rank. This means a straight aggregation is not possible. (If we were to do so, you would get a pension forecast which was too low). What you can do is ask for your earlier preserved service to be given a transfer value and transferred into AFPS 05, but you need to consider this option carefully before doing anything. AFPS 75 preserved awards (prior to 6 Apr 06) are payable at age 60 but if you transfer the value into AFPS 05 and leave before age 55, your pension will be preserved until age 65.

What if I signed a form to say I wanted my earlier service to be added to my MPGS service?

In these circumstances, you may ask for a new PBS which reflects your total service.

If I leave the Regular Armed Forces and join MPGS do I have to join AFPS 05? (new question 18/08/05)

Not if the transfer to MPGS is within one month of leaving. If the break in service is more than one month this is not classed as continuous service and you would have to join AFPS 05.