Defence IssuesNew AFPS & Compensation Schemes
COMPARISONS BETWEEN THE CURRENT AFPS AND THE NEW AFPS
| Benefit | Current AFPS | New AFPS |
|---|---|---|
| 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 |
| Normal Retiring Age | Age 55 | Age 55 |
| Preserved Pension | Normally paid from age 60 (but age 65 for future service) | Normally paid from age 65 for future service. |
| Value Against current Inland Revenue limit of 66.67% | 62.5% | 62.5% at 35 years, with scope to accrue additional benefits for long servers. |
| Accrual Rate | Uneven accrual rate - faster for officers up to Immediate Pension Point (IPP). Full career pension 34 yrs for officers and 37 yrs for Other Ranks (ORs). Lump sum of 3 times pension | Even accrual rate at 1/70th of pensionable earnings for each year of service with full career pension after 35 years. Lump sum of 3 times pension. |
| Earliest age for Immediate Pension (IP)/Early Departure Payment (EDP) | Age 37/16 yrs - officersAge 40/22 yrs - other ranks | IP replaced by new EDP. Paid at age 40/18 yrs service for both officers and other ranks. |
| Commutation | Resettlement commutation with larger lump sum and reduced IP which is restored at age 55 | Inverse commutation reducing lump sum to increase pension. Resettlement commutation no longer allowed by Inland Revenue. |
| Reckonable Service | From age 21 for max of 34 yrs - officersFrom age 18 for max of 37 yrs - ORs | Counts from date of joining the Armed Forces for both officers and ORs. |
| Death in Service benefits | Normally a tax-free lump sum of one year’s 3 pensionable salary | Tax-free lump sum of four times pensionable salary |
| Widow(er)s’ Pensions (Non-attributable) |
Normally 50% of Service person’s earned pension but ceases on cohabitation or remarriage. Short term pension payable at level of member’s earnings or pension for up to 9 mths | Up to 62.5% of service person’s pension payable for life. No short term pension but 5 yr guarantee of income if member dies early in retirement. Includes benefits for unmarried partners. |
| Non-attributable ill-health benefits | Receive Service Invaliding Pension plus tax-free terminal grant of 3 times pension. Level of pension based on length of service and normally enhanced (if served longer than 5 yrs) | 3 tier system dependent on seriousness of disability:
Tier 1 - Gratuity related to salary and number of years served. Tier 2 - pension enhanced by one third of remaining service until normal retirement age plus tax-free terminal grant of three times pension. Tier 3 - pension enhanced by half of remaining service (plus min guarantee of 20 yrs accrued pension) plus tax-free terminal grant of three times pension. |
| Children’s pensions | Children’s pensions payable but not to children of post-retirement marriages | To include pensions for children of post retirement marriages |
| Specialist Pay | Not pensionable | Not pensionable. |
| 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 | The new scheme will provide opportunities for member’s to improve benefits. The exact details will be developed when the Inland Revenue have finalised their plans for simplification of pension taxation. |
| Pension Increases once in payment | Retail Price Index (RPI) increases 4 | RPI increases |
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 Best year of pensionable pay in the final 3 years of employment with earlier years brought up to current value by application of Retail Price Index.
3 1½ years pensionable salary for attributable death in service
4 For those in receipt of an Immediate Pension RPI increases from age 55.
Last Updated: 20 Apr 04