Many of you will be leaving the Armed Forces with deferred AFPS 15 benefits (so, benefits which are not payable immediately) and be taking up employment elsewhere in the public sector. In this article we look at how the AFPS 15 continuity rule works if this new employment starts within 5 years of your discharge and how the transfer rules work if it is not.
During public sector service, benefits increase each year by the accrual rate applicable to the specific scheme, with earlier years pensions savings increased by Average Weekly Earnings (AWE). The AWE factor, which is announced annually, is calculated using information based on the Monthly Wages and Salaries Survey, which samples around 9,000 employers in Great Britain.
Once deferred, AFPS 15 pensions increase by the Consumer Price Index (CPI) and are normally payable State Pension Age (SPA) – this deferred pension age is common to all public sector pension schemes introduced since April 2015.
If you take up further public sector employment within 5 years of leaving, your pension becomes ‘live’ again. If any CPI increases have been applied, these are ‘undone’ and replaced by AWE rates – six out of the last seven years, for the Armed Forces, AWE has been higher than CPI, but this varies from scheme to scheme.
This continuity means that your Armed Forces service counts towards the normal 2-year vesting period to qualify for pension benefits in your new scheme. Further, if you are joining the Police or Fire and Rescue service, your accrued benefits are payable if you leave at age 60 rather than at your SPA if they remained deferred.
If the break is over 5 years, the continuity rule does not apply, and you have the choice of transferring your benefits to your new scheme or leaving them where they are.
The transfer process is straightforward:
- Obtain a ‘statement of entitlement’ from Veterans UK.
- Ask your new scheme administrator what the value of your AFPS 15 benefits will buy in their scheme.
- If you decide to go ahead, apply to Veterans UK for a transfer value payment.
Transfers must be made within 12 months of being entitled to be a member of your new public sector scheme.
In reaching your transfer decision, the most important consideration is that public sector schemes have a 2-year vesting period, and transferring benefits in from elsewhere could mean automatic qualification.
