138/2012 - New Armed Forces pension agreed
Armed Forces personnel will continue to receive one of the best and most valuable public service pensions, under a new scheme announced today by the Ministry of Defence.
In July, the Ministry of Defence published an outline design of the new Armed Forces Pension Scheme and invited further comments. The consultation has resulted in a key change - Service personnel will now have more flexibility for the money they receive if they qualify for an early payment at 40. This is another benefit exclusive to Service personnel.
The new scheme means unlike other public service pension schemes, Service personnel will still not have to make personal contributions and the Normal Pension Age will be 60, whereas for most other public service pensions the Normal Pension Age will be linked to the State Pension Age, which is considerably higher.
The scheme will also deliver on the approach set out in Lord Hutton’s Independent Public Service Pensions Commission to reform pensions and ensure that they are more affordable and sustainable for the long-term. Changes will not affect accrued rights of those currently serving or the age at which their accrued pension benefits can be drawn.
Minister of State for Defence Personnel, Welfare and Veterans Mark Francois said:
The Government had to make some tough decisions to ensure sustainable public service pensions, but recognises the unique commitment made by the Armed Forces and therefore protected them as much as possible, making these changes in the fairest way possible. Armed Forces personnel will continue to receive one of the best and most valuable pensions in the public and private sectors, maintaining the non-contributory element, an early pension point at 40 and a lower Normal Pension Age than other public sector employees.
Benefits of the proposed new scheme include: * It creates one scheme for all – including Reservists. There are currently several different Armed Forces pension schemes; * Service personnel won’t have to make any personal contributions to their pension; * Service personnel will receive a monthly income and a tax-free lump sum if they leave the Armed Forces aged at least 40 and have given at least 20 years of service. No other public service makes any pension payment that early. In addition, Service personnel will now have the flexibility to convert their total Early Departure Payment lump sum into additional monthly income payments; * As recommended by Lord Hutton, the Normal Pension Age will be 60 – considerably lower than most other public service pensions; * Accrued pension rights have been protected so there is no change to the age at which those currently serving can draw the benefits that they have accrued in the current schemes, which are based on final rank and salary; * It is in line with Lord Hutton’s recommendations and other public service schemes, moving to a pension based on career average earnings, rather than final salary; and * All members of the Armed Forces Pension Scheme who were within ten years of their Normal Pension Age on 1 April 2012 will receive transitional protection and will not be transferred to the new scheme.
The scheme was designed after extensive consultation with over 25,000 personnel both in the UK and overseas including Afghanistan, Germany, Gibraltar and the Falkland Islands which included presentations, focus groups and questionnaires.
Notes to editors
In 2010 the Government announced it would be reforming all public service pensions and later accepted the Independent Public Service Pensions Commission’s recommendations to make them fair and sustainable.
The Ministry of Defence ran an Armed Forces Pension Scheme consultation exercise from March to May 2012 to set out the reasons for change and invite views from Service personnel and external stakeholders.
On 31 July, the Ministry of Defence published the Outline Scheme Design, which set out the key features of the new scheme. The document was primarily aimed at Service personnel and external stakeholders, including the Forces’ Families Federations, the Forces Pension Society and the Royal British Legion. There was a further period of consultation for personnel to make comments which ended on 7 September.
The new Armed Forces Pension Scheme will be introduced from April 2015. All those serving when the new scheme is introduced will be automatically enrolled unless they qualify for transitional protection.
The total cost of the new Armed Forces Pension Scheme will be 31.5 per cent of pensionable pay, which is all borne by the Exchequer, as there are no employee contributions.
A copy of the final agreement can be found at http://www.mod.uk/DefenceInternet/AboutDefence/WhatWeDo/Personnel/Pensions/FinalAgreement.htm
For further media enquiries please call Robert Mead at the Ministry of Defence press office on 020 7218 7924.