Head of Pensions David Roberts shares some important points about the AFPS 15 remedy.
Implementation of the AFPS 15 remedy (McCloud) began on 1 October 2023, and I thought it might be helpful to share a couple of observations we have made during the eight months since it started.
AFPS 15 vs Legacy Scheme
Having seen a high number of Remediable Service Statements (RSSs) and provided explanations of their comparative figures, it has been interesting to see how many of our members have altered their initial thoughts of opting to receive benefits from their legacy scheme for the remedy period (1 April 2015 to 31 March 2022).
The election choice is a very personal one and is determined largely by what the individual is seeking to achieve from their Armed Forces pension benefits. The key decisions are whether the member wishes to create the greatest tax-free lump sum available to them or realise the maximum income, and also when in their life they want this – immediately on departure from the Armed Forces or later on. There are also wider considerations, not least the value of dependant benefits, should the member pre-decease their spouse/civil partner/eligible partner, as well as pension entitlements for their children.
Whilst the remedy choice might seem very obvious in some cases, for others it is less clear. I would recommend that members maintain an open mind regarding their election choice until they have received their ‘election’ RSS from Veterans UK and interpreted the comparative figures.
AFPS 15 Added Pension
The effect of rolling back eligible members to their legacy scheme for the remedy period means that members will not have been in AFPS 15 between 1 April 2015 and 31 March 2022. Therefore, they will not have been eligible to enter into an Added Pension contract. Consequently, any AFPS 15 Added Pension purchased in the remedy period has been extinguished and the money that members have paid in will be reimbursed to them in the form of a compensation payment.
Pensioner members with AFPS 15 Added Pension already in payment will continue to receive it until they make their election.
The compensation payment will be reimbursed as a lump sum. It will comprise a refund of contributions paid, minus tax relief that will have been given at the time the contribution was paid, plus interest.
Serving personnel will receive a compensation letter along with a Pension Form 6R from Defence Business Services (DBS) Veterans UK.
If the member has an existing Added Pension contract and wishes to set up a new (second) contract into which they can pay their compensation lump sum, they must submit Pension Form 6R to DBS.
Once this has been approved, the member will receive Form 6A (R) from DBS, with a quote to purchase the second contract. Form 6A (R) will need to be completed and returned with the payment.
If the member does not have a current Added Pension contract, they can complete a Form 6 and send it to DBS Veterans UK by post. DBS will then provide a quote and the member can choose to set up an Added Pension contract by completing a Form 6A and return it to DBS.
It is important to note that the option to enter into a second contract will expire on 31 March 2025.
If a member has not received their compensation payment before their exit date and wishes to apply for a second Added Pension, they must email DBS about their intention via: DBS-JPAC-PMC@dbspv.mod.uk
