MONEY The New Pension Plan Proposals for by Lt Col Terry Robson, SO1 Future Armed Forces Pension Scheme
R
eaders may recall that the MoD undertook a consultation on the new Armed Forces Pension Scheme during the first part of this year. Over 17,500 Service Personnel and other organisations
responded to the Initial Consultation Exercise. Although there have been some constraints, the MoD has listened and done everything possible to reflect those views in the design of the new scheme and on 31 Jul 12 MoD launched the Outline Design for that new Scheme.
The key features of the new scheme are: • A move from a Final Salary scheme to a Career Average scheme • An Accrual Rate of 1/47ths – an improvement on the current 1/70ths
• The Normal Pension Age will move from age 55 to age 60 • No personal contributions (unlike every other public service pension scheme)
• Retention of the Early Departure Payment. The qualification point will move from 18 years service and age 40, to 20 years service and age 40.
All public service workers are facing changes to their pensions and the Armed Forces are no exception. The new Armed Forces Pension Scheme will be less valuable overall than the current schemes, however, many junior Service personnel will be largely unaffected by the changes.
This is a long term project, it will not begin until 2015 and the full effects won’t be felt by the Services until 2035. It is linked to the New Employment Model and the Service Chiefs recognise that Terms of Service will need to be realigned to reflect the new pension construct. The priority will be to review Terms of Service
34 Envoy Autumn 2012
for those whose current engagement means that they will exit the Armed Forces soon after transition.
The new scheme will retain the Early Departure Payment although the qualification threshold will change slightly, moving from 18 years of service to 20; but the requirement to be at least 40 years old remains. No other public service scheme makes payments at such an early age.
Readers will recall that the Government has already committed to protecting the pension rights of those currently serving up to the point of transition to the new scheme. There will be no change to the age at which those currently serving will be able to draw those benefits and they will be linked to the final salary on exit from the Armed Forces, not the salary at the point of transition.
The Chief of the Defence Staff, General Sir David Richards, GCB CBE DSO ADC Gen has said: “The Service Chiefs and I are determined that the new Armed Forces Pension Scheme will remain amongst the very best available and ensure we recruit and retain sufficient personnel to deliver the operational capability our Nation requires”.
Further information
More information on the new pension is available on the MoD website; this includes the official Outline Scheme Design document and a 25 minute video explaining the key features of the scheme.
The Outline Scheme Design document invites comments from Service Personnel and interested external stakeholders by 7 Sep 12 ahead of final agreement on the new scheme.
DIB ISSUE: 2012/41 A new Armed Forces Pension Scheme – Publication of the Outline Scheme Design. This can be found on the Airspace website.
www.raf-ff.org.uk
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