There are two armed forces pension schemes.
If you have service in the armed forces between 6 April 1975 and 5 April 2005 you will be contributing to the armed forces pension scheme 1975 (AFPS 1975), unless you chose to move to the armed forces pension scheme 2005 (AFPS 2005) during the ‘offer to transfer’.
If you joined the armed forces after 6 April 2005 you will be contributing to the armed forces pension scheme 2005 (AFPS 2005).
The 2005 armed forces pension scheme at a glance
- You do not have to contribute anything.
- Your pension is calculated as 1/70th of final pensionable earnings for each year or service, up to a maximum of 40 years of reckonable service.
- Your pension can be paid from age 55. It is also possible to access benefits earlier via the payment of an early departure payment (EDP) if you have at least 18 years of service and have reached age 40.
- If you wish to leave earlier than 55, providing you have completed at least two years of qualifying service you will be eligible for preserved benefits – which will be payable in full from age 65.
- Medical and dental officers are not normally eligible for EDP.
The 1975 armed forces pension scheme at a glance
- You do not have to contribute anything.
- Your pension is calculated with reference to your rank and length of service.
- Your pension can be paid from age 55 after 34 years of reckonable service as an officer.
- Transferred in service and added years are excluded for this purpose.
Qualifying and reckonable service
Qualifying service includes your paid service plus certain other periods, for example service aggregated from the AFPS 1975, service transferred into the AFPS 2005 and service on secondment to NATO/UN. Qualifying service does not include added years.
Reckonable service is the service which counts towards the calculation of your pension. For an Officer this starts at age 21, or date of entry if later, for a maximum of 34 years (AFPS 1975) or 40 years (AFPS 2005). Reckonable service includes service transferred from other pension schemes and added years.
You will need to have completed two years reckonable service to qualify for most benefits.
Leaving the 1975 section early
A pension can also be paid immediately on leaving the armed forces after 16 years reckonable service as an officer. This is known as the immediate pension (IP) point.
Only actual service in the armed forces counts towards the 16 years reckonable service required to qualify for IP.
Once you have completed at least 16 years service as an officer you will be entitled to a pension and terminal grant (three times the pension) on leaving service.
If you leave the armed forces, at your own request, after reaching the IP but before completing your commission or before age 50 you will qualify for premature voluntary retirement. These rates of pension are lower than the IP rates.
If you leave the AFPS 1975 before you reach the IP point, having completed at least two years of reckonable service you will be entitled to a preserved pension and terminal grant payable from age 60, for service before 6 April 2006, and age 65 for service after 6 April 2006. If you claim all the benefits at age 60 they will be actuarially reduced to reflect that they are being paid early.
Taking a lump sum
The lump sum is known as a terminal grant and is calculated as three times the pension. The terminal grant is free of income tax.
More information on taking a bigger lump sum (resettlement commutation and life commutation) is available in the GOV.UK guidance for AFPS 75 Commutation.
Taking a smaller lump sum and bigger pension is only possible for 2005 section members and is known as inverse commutation. You can give up some or all of your lump sum to provide additional pension benefits for yourself, or for yourself and your dependants.
Retiring because of illness or injury that is not your fault
Providing you have completed more than two years reckonable service in the AFPS 1975 you will receive an invaliding pension and terminal grant.
Providing you have completed more than two years reckonable service in the AFPS 2005 the scheme provides for 3 tiers of ill health retirement.
If the injury is attributable to your service, attributable benefits are not paid under either the AFPS 1975 or the AFPS 2005.
Read more information on compensation at GOV.UK