Many serving personnel have little idea of the real value of their Armed Forces pension, or how much they would need to pay into a private pension to gain a similar income. In this article, we look at how very valuable the Armed Forces pension element of your overall ‘package’ is.
All Service personnel are currently members of AFPS 15 and 1/47th of their pensionable pay is added to their pension savings each year with earlier years’ pension savings increasing by Average Weekly Earnings (AWE) which, for April 2024 is an increase of 7.7%. AFPS 15 is amongst the best pension schemes in the public sector. For the Armed Forces it provides a deferred pension at State Pension Age and an Early Departure Payment (EDP) Scheme to those who give at least 20 years reckonable service and leave at age 40 or above. For those who serve to age 60, the AFPS 15 pension is paid immediately on leaving, negating the requirement for an EDP.
You do not see a pension deduction on your pay slip, and this makes it, technically, a non-contributory pension scheme. However, pension benefits are taken into consideration in determining pay scales and when the Armed Forces Pay Review Body makes its recommendations to the government each year it has to take the value of the non-contributory pension into account.
If you leave the Armed Forces, the chances are that you would have to save for your pension by means of an occupational pension run by your new employer or make a private pension arrangement. What could that mean? To provide a sense of how valuable your Armed Forces pension is, using commercially available estimates, the following table illustrates what you would need to pay into a private pension to achieve a broadly similar income to your Armed Forces pension:
| Fixed Annual Pension of: | Would require around: |
| £10,000 | £200,000 |
| £15,000 | £300,000 |
| £20,000 | £400,000 |
| £25,000 | £500,000 |
| £30,000 | £600,000 |
| £35,000 | £700,000 |
So, for example, a fixed annual pension of £15,000 would cost you around £300,000 at 2024 values. And in considering this against your AFPS 15 benefits, the above figures do not include any EDP type income or lump sum that might be payable prior to the pension coming into payment. What’s more, unlike this fixed annual pension example, your service pension rises in line with inflation and, of course, the longer you serve, the greater your pension value!
So worth thinking about when considering the true value of your Armed Forces pension compared to what is available commercially.
Information correct at time of publication May 2024
