New Armed Force Pension Scheme

From: Vice Admiral David Steel CBE, Chief of Naval Personnel & Training and Second Sea Lord

You will all be aware that the Government directed a review on Public Sector pensions including the 2 Armed Forces schemes. This review found them all to be unaffordable and therefore new schemes were to be designed. This work has now completed and a new Armed Forces Pension Scheme (currently referred to as Future AFPS) has been designed, to be introduced from Apr 15.

On the 16 Oct 12 the overall design of the Future AFPS was agreed with the Government. Having been agreed, I wanted to take this opportunity personally to reassure you of a number of key features under the new scheme which I believe are of considerable importance, and a further additional change which is very much in the favour of Service personnel.

Key Points

The Treasury agreed that Service personnel will continue not making any personal contribution towards their pension. This at a time when our civilian counterparts’ personal contributions are being increased.

Whilst the Early Departure Payment (EDP) qualification point will move from 18 years service under AFPS 05 to 20 years service under the Future AFPS, the requirement to be at least 40 years old remains unchanged. No other public pension scheme makes any payment at such an early age or indeed such a significant payment.

I am aware that current Career Commissions and the Open Engagement do not guarantee that Service personnel will achieve the new EDP qualification requirements. My team is currently working on changes to commission/engagement lengths with the aim that all personnel on a CC or OE can be offered an extension to their employment to allow them to achieve a minimum of 20 years' service.

In light of the views expressed by Service personnel during the consultation period, the Treasury has also accepted the proposal that the Future AFPS will include additional choice in how the EDP will be taken. To that end the new scheme will offer an individual the option to forego the lump sum and instead convert it in to additional monthly income; a choice not currently available under AFPS 05.

I fully recognise that, in comparison with the current pension schemes, the Future AFPS will, for some, not be as favourable. This is clearly unwelcome. Some others, however, will see an increase in benefits payable under the Future AFPS in comparison to what they might have earned under the current schemes. Whatever the personal circumstances of individuals in the Service today, they will enjoy preserved rights in relation to the current pension schemes. What does this mean? It means that all pension benefits earned under AFPS 75 and 05 will remain payable to the individual at the appropriate time. Anything earned under the Future Pension Scheme will be in addition to that earned under the present schemes.

In summary I remain convinced, as does the Forces Pension Society, that the new pension scheme is as good as the Services could have hoped for in the current fiscal climate. Indeed, the new scheme remains amongst the very best schemes available in either the public or private sectors. Much work is now being done to provide the levels of detail each and everyone of you deserves and I will keep you fully informed with developments. The Navy Pay and Pensions team will be on the road this Autumn to give presentations and more detail, and allow members of the Naval Service to raise questions about the new arrangements.