The Office for National Statistics has today announced that the Consumer Prices Index (CPI) 12-month inflation rate was 0.5% in September 2020, up from 0.2% in August.
This rate is formally announced in October, and the 0.5% CPI increase confirmed today will come into force next April. This is the figure that will be used to increase all Armed Forces pensions in payment from April 2021.
This increase, known as the Pension Increase (PI), does not come into force on the 1st April but rather on the first Monday after the beginning of the new tax year – so, for 2021, it comes into force on 12th April.
There is a Government produced table which divides the year (1 April – 31 March) into 13 parts and the first PI is proportionate. The pensions of those leaving in the first few weeks of April will get the full PI in the following April. The increases for those leaving after the first few weeks of April are then paid in the following April on a sliding scale, culminating in those leaving in the final few weeks of March getting no PI adjustment at all in respect of that first year.
The full increase is paid in subsequent years. If you are leaving with a preserved AFPS75 or AFPS05 pension or a deferred AFPS15 pension, it will be increased to take account of all the PIs that have occurred since you left.