MONEY
The Impact of a Split Service Pension
A number of people serving in the Armed Forces have suddenly discovered that they are not going to receive the pension and other benefits they expected to receive on exit because they have had split service. Lt Cdr David Marsh, the Pensions Secretary of the Forces Pensions Society, looks at how this situation has arisen.
B
efore the introduction of the new AFPS05 pension scheme on 6 Apr 05, individuals rejoining the Armed Forces
did so on (what was then known as) the Armed Forces Pension Scheme. Their previous service on the scheme was aggregated into their re-entry service and the two together made up the person’s total pension entitlement.
It was often the case that individuals who had left the Services were contacted by the Armed Forces and persuaded to re-enter for ‘x’ number of years to deploy their specific skills in shortage categories and, more importantly for them, to ‘complete their time for pension’. If employment conditions in Civvy Street were a little rocky at the time, the lure of an immediate pension in the not too distant future was often a decisive factor.
In April 2005 the new pension scheme (APFPS 05) threw a spanner in the works by not allowing individuals the opportunity to leave after 16 years’ service (for officers) or 22 years’ service (Other Ranks) with an immediate pension because, unlike the old pension scheme (now called AFPS75) which is approved by Royal Warrant and Prerogative Instruments, it was an Inland Revenue approved scheme by Act of Parliament – and the earliest age that an Inland Revenue approved scheme will allow a pension to be paid is 55.
(55 is the earliest age a pension can be put into payment for any Inland Revenue approved scheme. In 2005 it was age 50, but this was moved to 55 in Apr 10, and as that was already being planned in 2005 it was sensibly decided by the MoD that AFPS05 would make 55 the earliest age a pension could be paid from the day the scheme started, for continuity purposes.)
However, the MoD still needed a major incentive to encourage individuals on the
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new AFPS 05 pension scheme to serve to age 40 and so it invented the Early Departure Payment (EDP) system. This is a system that pays a lump sum and an income stream to those who leave between the ages of 40 and 55, and who have completed at least 18 years’ ‘relevant’ service commencing from their first day of paid employment in the Armed Forces.
A large number of individuals who rejoined the Armed Forces with a Preserved Pension entitlement from their AFPS75 pension scheme did so in the belief they would be allowed to count their previous period of service earned on the AFPS75 pension scheme towards the 18 year qualification needed for entitlement to the new EDP system of awards on the AFPS05 scheme, provided they aggregated two periods of service together. That is to say, after completing a total of 18 years’ service they would leave the Armed Forces at the end of their second period of service with an EDP
lump sum and an income stream payable to age 65, the point at which the new AFSP05 preserved pension would then normally become payable. (Re-entries after 6 Apr 05 could only join the new AFPS05 scheme.)
Indeed, such payments were made by the Armed Forces Pension Scheme administrators under that very guise until Jan 12 when they were informed by the pension policy branch in the MoD that they had misinterpreted the rules in allowing previous service under the AFPS75 pension scheme to count towards the EDP qualification time of 18 years relevant service.
Not only that, but they had also erroneously counted the previous service on the AFPS75 scheme towards the 12 year requirement for the payment of a Resettlement Grant and for the calculation of Compensation Lump Sums payable for redundancy too! The only people who were given special one-off dispensations to count their AFPS75 service towards the 18 years’ ‘relevant’ service qualification for EDP awards were those who transferred to the AFPS05 pension scheme as part of the Offer To Transfer process that took place on 6 Apr 06.
The point at issue was the term ‘relevant service’, which needed to be completed to gain entitlement to EDP payments and other related benefits. ‘Relevant service’ is not the same as
www.raf-ff.org.uk
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