As we continue to challenge any reduction to the tax-free Lump Sum Allowance (LSA), we highlight why such a measure would be a breach of the Armed Forces Covenant.
The Armed Forces Covenant is a promise … that those who serve or have served in the Armed Forces, and their families, should be treated with fairness and respect in the communities, economy, and society they serve with their lives. And “face no disadvantage compared to other citizens in the provision of public and commercial services.”
This measure, if implemented would constitute a disadvantage in that AFPS75 and 05 do not allow service personnel the ability to reduce their lump sum payments to avoid a big tax bill should the LSA allowance be reduced. This is not the case for Defined Contribution pensions.
When the Armed Forces pay award was announced in July 2024, the Defence Secretary promised:
“This pay award will benefit every member of the Armed Forces. It is an important step towards turning around the declining morale and recruitment crisis we have faced in recent years. A clear demonstration of our Government’s commitment to improving service life”
And, as the MoD stated in their communications earlier this week, “our people are our strength”.
This Government has openly stated its desire to ‘reconnect’ the Nation with its Armed Forces and put the Armed Forces Covenant fully into law.
The Government now has an opportunity to align these words with actual deeds by ruling out any reduction in LSA in the forthcoming Budget. Should they choose to reduce the LSA level, this would constitute a direct breach of the Armed Forces Covenant, entered into knowingly by the Government.
We strongly urge the Government to do the right thing.
