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ensure that it retains its value up to the point it is claimed. Providing you are aged 55 or over you can apply to have your deferred pension paid before your State Pension Age, subject to an actuarial reduction, which means your pension payments will be reduced in value to reflect the fact that the pension will be paid over a longer period. For those who serve to the Normal Pension Age of 60, so long as they have at least 2 years qualifying service, they will be entitled to claim a full pension immediately. AFPS 15 will not automatically pay you a pension lump sum, however, you can create a tax-free lump sum by ‘surrendering’ a part of your annual pension. This is known as commutation. HM Revenue and Customs currently allow up to 25% of your overall pension benefits to be taken as a lump sum. The commutation rate is fixed at 12 to 1; so for each £1 of your pension you give up, you will be ‘buying’ a lump sum of £12. Once in payment, your pension will increase annually in line with CPI.
What is an Early Departure Payment? In addition to a pension, you may also be entitled to an Early Departure payment (EDP) which is an additional benefit which is entirely separate to your pension. The purpose of the EDP is to retain Regular personnel in Service through to at least age 40; to compensate them for the fact that a full pensionable career to age 60 is not available to the majority and to assist Service Personnel transition to civilian life. You will need to serve as a Regular for 20 years or more and reach at least age 40 to be eligible for an EDP. This is known as the 20/40 EDP point. The EDP is paid as a tax-free lump sum equivalent to 2.25 times your deferred pension, plus a monthly taxable income of 34% of the value of your annual deferred until State Pension Age. For each whole year served beyond the 20/40 EDP point, the value of the EDP will be increased by 0.85% of your deferred pension. You
can also choose to ‘give up’ your full EDP lump sum to increase the monthly EDP income. The income stream is paid at a flat rate until age 55 when it is uprated to take account of CPI growth since the date of exit and is then increased annually by CPI. The diagram below shows how the EDP works.
What is a Resettlement Grant? The Resettlement Grant is paid to Regular members of the Armed Forces who leave after 12 or more years’ service, but before they qualify for any other form of immediate pension or EDP benefits. It is not linked to your pension entitlement but it is intended to help you adjust to civilian life.
What pension benefits do dependants get? If a member of AFPS 15 dies, either in Service or after leaving the Armed Forces, benefits may be paid to a nominee, spouse, civil partner, eligible partner or eligible children. Benefits may consist of a tax-free lump sum (in some circumstances) and a taxable pension for life.
What about the pension I built up on AFPS 75 or AFPS 05 prior to transferring to AFPS 15? The benefits you have already built up in previous pension schemes are known as ‘accrued rights’. These rights vary from scheme to scheme, but the value of pension benefits earned up to the introduction of AFPS 15 are protected. This includes, where applicable, the AFPS 75 Immediate Pension and lump sum, AFPS 05 EDP and lump sum. These benefits will remain payable at the time they were expected to be paid, linked to your final pensionable pay/ rank at the point of leaving the Services, not the salary and rank at the time of transfer to AFPS 15.
raf-ff.org.uk | Winter 2018 | ENVOY
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