In this month's Pathfinder article, we examine transfers from the AFPS
Many of you will be leaving service with a preserved or deferred pension. That means that you haven’t served for long enough to qualify for an immediate pension, so will have to wait until 60, 65 or your state pension age (SPA) to draw it, depending upon which AFPS your benefits are in.
Most of you will leave those preserved or deferred benefits in MOD’s safe hands but some of you will be wondering whether or not to move them. This article takes a look at the transfer rules, together with the AFPS rules allowing preserved or deferred benefits to be claimed early.
Looking at the latter first. The ages at which AFPS preserved and deferred benefits are payable are:
For AFPS 75, preserved pensions are payable at age 60 for the proportion of the pension earned up to and including 5 April 2006 and age 65 for pension earned after that date.
For AFPS 05, the preserved pension age is 65.
For AFPS 15, deferred benefits are payable at the SPA of the member.
Veterans often ask for these benefits to be ‘cashed in’ instead of paid as an annual pension. They recall that Chancellor Osborne relaxed the pension rules to allow certain pension savings to be taken as cash rather than an annuity for those retiring after 6 April 2015 and I am afraid we have to disappoint them as unfunded public sector pension schemes are not amongst the pension arrangements to which this relaxation applies.
Each AFPS does, however, allow preserved/deferred pensions to be drawn early, with actuarial reductions – that means they are reduced to take account of the fact that they are in payment for longer than would otherwise be the case.
For AFPS 75, the part of the pension payable at age 65 may be drawn at 60.
For AFPS 05 and AFPS 15, the whole preserved/deferred pension may be drawn at any age after 55.
To give you an idea of how costly it can be to take preserved benefits early, an AFPS 05 member taking their preserved pension at age 55 can expect to lose 44.6% of their pension and 28.8% of their lump sum due to the actuarial reduction. You will see from this example why we strongly advise that anyone considering taking their preserved/deferred benefits early with actuarial reductions should seek financial advice before acting.