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Preserved/Deferred Pensions – a regular income for life

We are still receiving many enquiries with regards to preserved/deferred pensions even after our push during Pensions Awareness week, and on Radio 4's Moneybox Live so, we thought why not set out the rules again, in the hope that you will spread the word.

It is worth having, once in payment, payable for life – a regular income just for waking up each day

On 6 April 1975 the Social Security Pensions Act came into law* in the United Kingdom, bringing with it a significant improvement in benefits provided by any employer’s pension scheme. Prior to this date, employees had no statutory rights to the benefits accrued in an occupational pension scheme if they ‘left employment early’. The Act changed this and required that someone with over five years’ employment under a scheme was entitled to certain preserved rights – known as a ‘preserved pension’. For those with less than five years in a scheme, the Act required that they were only entitled to the refunding of contributions that they had personally made into the scheme (the employee contribution component).


A preserved pension is simply a benefit you have earned by virtue of reckonable employment, but which is not paid to you until you reach an age at which the scheme rules allow you to draw it. Until it can be drawn, it is held on your behalf and the value uplifted each year in line with CPI. Once you reach the age stipulated by the scheme rules, then you can draw the benefit. Alternatively, on leaving employment early, you can choose to transfer the value of your earned benefits into another final salary scheme within the UK (but should only do so after taking independent financial advice – schemes have changed over the years, and the rules and risks may be very different under any new scheme). Contrary to popular belief, all the AFPS schemes (1975, 2005 and 2015) have provision for preserved pensions (known as deferred pensions under ’15), as most scheme members will not serve until their Immediate Pension Point (’75) or Normal Pension Age (‘05 and ‘15). For those with service prior to 1975 however, the rules were very different.


The consequences of the legislation as it affects preserved pensions is that any member of the Armed Forces who left service after 1 April 1975 and who served over five years, might be entitled to a preserved pension (we will explore the machinations of the word ‘might’ later in this article). The second consequence unfortunately is more straightforward. If you left the Armed Forces before 1 April 1975 but had not qualified for a full pension (that is had served at least 16 years after the age of 21 for an officer, or at least 22 years after the age of 18 for a Rating/Other Rank), then you have no entitlement to a preserved pension. This is because they were deemed to have ‘left early’ under the terms of the Act, and because the scheme was (and remains) non-contributory they also have no entitlement to any refund. The cohort that might be entitled to a preserved pension; is therefore limited to those who left the Armed Forces after 1 April 1975. We must now address the word ‘might’, and this changes over time between 1975 and 1988. This is because pension entitlement has been progressively amended since 1975, either through subsequent primary legislation or subordinate Statutory Instruments. This ‘might’ cohort can be broken down by time as in the table below:

There are a select few who, even though they may meet the above criteria, will still not have any preserved pension benefits. These are people who joined on non-pensionable terms (predominantly gratuity-earning short service commissions), members of the Volunteer Reserve, personnel who opted out of the Armed Forces Pension Scheme, and those who transferred their benefits into another occupational pension scheme.


Perhaps the most important point to take away from this article is that the onus rests upon the individual both to know that they have an entitlement and to remember to claim their preserved pension.
In 2019, the Association of British Insurers (ABI) estimated that more than 1.6 million pension pots worth a total of over £19.4 billion are ‘lost’ – that is, the scheme providers are holding the benefits earned by former members, but either have no way of tracing them or the individual has not approached them to claim their pension. Changes in the law now require every pension provider to send its scheme members an annual statement, but there are a significant number of instances where individuals have not informed their provider of a change in address, or where their employment predates this requirement. Veterans UK do their very best to ensure pensions are paid when they are due, but particularly for those who have preserved pensions under the AFPS 75 scheme and/or those who have moved address since leaving, this is a significant challenge. It is advised that you act to claim your preserved pension approximately three to six months before it is due to come into payment; again, the ages at which this applies vary by time and scheme so having established from the previous section that you are entitled to a preserved pension, the ages at which benefits are payable are:

  • AFPS 75. Preserved benefits earned up to and including 5 April 2006 service will be paid at age 60. Benefits for service after this date will be paid at 65. You can elect to take all your preserved benefits at age 60, but the benefits which would ordinarily have been due at age 65 will be actuarily reduced to reflect the early payment.
  • AFPS 05. Preserved benefits will be paid at age 65.
  • AFPS 15. Deferred pensions will be paid at your State Pension Age.

In order to claim your preserved (or deferred) pension, you must apply to the scheme administrator approximately three to six months before it is due to come into payment. This is done by completing an AFPS Form 8 and submitting it to Veterans UK at Glasgow.

Through our work with Veterans' Gateway, we would like to see every veteran with a pension entitlement receiving it, and would urge all members to consider if they (or other family members) meet the eligibility criteria.

Finally, we are delighted to hear that Ken our caller on Moneybox Live has now confirmed our thoughts that he does have entitlement to a preserved pension, after speaking with Veterans UK.

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