The current boom in AI which has rapidly accelerated since 2020 has transformed the way we work and live, and platforms such as ChatGPT are amongst the most visited websites globally.
Whilst these advancements can bring significant benefits to businesses and individuals, there are occasions where misleading information generated by them can be costly. We are seeing increasing numbers of our members beginning to consult AI to get guidance on their Armed Forces pensions with some mixed results. We believe that the more nuanced aspects of these pensions are not currently recognised by some AI applications.
Recent Examples
Immediate Pension Entitlement and Retirement Timing
One of the most commonly asked questions to the Society from our members is to understand when they can retire with immediate pension benefits in payment. It would be disastrous to miss out on these significant benefits by mistiming retirement by just a day or two early. Similarly, if it is someone’s ambition to leave service at the earliest opportunity with benefits in payment, they might not wish to remain in service beyond that point.
When consulting AI to understand the point at which immediate pension benefits are payable, it can be misleading. As an example, a service person might have started out on the AFPS 75 as a Soldier and then gone on to commission from the ranks. As a non-commissioned Officer, there is a requirement to complete 22 years of reckonable service from age 18 to qualify for an immediate AFPS 75 pension at discharge. As an Officer, an immediate AFPS 75 pension is payable at discharge after 16 years of reckonable service from age of 21. A popular AI tool indicated that a person in these circumstances would only be able to qualify for an immediate AFPS 75 pension at discharge if they completed 16 years of commissioned service from the point they commissioned from the ranks. This is not correct.
Immediate Pension Entitlement for Age-Based Qualifying Criteria
Another example from a member was the concern that they would not qualify for immediate pension benefits if they left service the day before their 40th birthday which is when their contract ended. AI had confirmed multiple times that they must leave on or after their 40th birthday in order to receive those benefits which is incorrect. The individual concerned in this case could leave the day before their 40th birthday. Of course, that is not always true and depends on the individual circumstances. The best way to confirm entitlement to immediate pension benefits at discharge is to request a pension forecast from the scheme administrator (Veterans UK), ensuring that the anticipated discharge date is specified.
Pension Abatement When Re-joining FTRS
It is common for Regular service leavers to re-join service into Full Time Reserve Service (FTRS). If a pension is already in payment after leaving Regular service, that may be subject to abatement. This means that if the annual pension from Regular service (AFPS 75 or AFPS 05) combined with your FTRS annual salary exceeds the final Regular salary, then the pension is abated. When consulting AI about this concept, it states that the AFPS 05 pension is not subject to abatement which is incorrect. Abatement applies to all pensions when re-joining except those paid from the AFPS 15 or NRPS. Even then, the value of these pensions may be included in the abatement assessment.
AFPS 05 EDP Benefits and Re-joining FTRS
More commonly, a Regular service leaver might be in receipt of AFPS 05 EDP benefits rather than the AFPS 05 pension. Again AI is incorrect when explaining the effects of re-joining FTRS with AFPS 05 EDP benefits in payment. It states that there is no effect on the AFPS 05 EDP lump sum which is very misleading. To retain the full value of the AFPS 05 EDP lump sum, there needs to be a break in service which would be long enough to ‘earn’ the value of the AFPS 05 EDP lump sum based on the final Regular salary. If re-joining during that break, the unexpired portion of the AFPS 05 EDP lump sum would need to be repaid and is then lost permanently. AI states that the AFPS 05 EDP lump sum is retained in full regardless of the length of the break in service.
This is a significantly incorrect piece of information which could have profound effects because some or all of the AFPS 05 EDP lump sum might need to be repaid after re-joining FTRS. When challenging AI on this point, it does concede that there may be an unexpired portion of the AFPS 05 EDP lump sum to repay but goes on to state that it is not possible to calculate the length of the break required. Again, this is incorrect and the break required can be calculated with ease.
AFPS 15 EDP Benefits and Re-joining FTRS
When re-joining FTRS service with an AFPS 15 EDP in payment, this remains in full payment and is not reduced in any way or included in abatement assessments. However, AI states that it is suspended if re-joining FTRS. It is only when replying that this is incorrect, that the AI model concedes that the AFPS 15 EDP remains in payment.
AFPS 15 Pension Vesting Following Re-employment
Another error occurs when asking AI if you need to ‘vest’ again after leaving Regular service with an AFPS 15 pension in payment and then re-joining service again more than 28 days later. We know it is the case that vesting (complete 2 calendar years of service) is required to receive any further pension benefits from the AFPS 15 if the previous AFPS 15 pension has been crystallised. However, AI is adamant that this is not the case, despite being pressed on the issue with several follow up questions.
It is our view that if you have used an AI tool to assist with your understanding of the Armed Forces pension scheme rules, you must get this checked to ensure it is correct. This is particularly important if you are considering re-joining service in some capacity as the potential for significant financial loss is increased.
So when can AI be useful when trying to understand more about your Armed Forces pension?
There are undoubtedly times when AI will be able to assist, but we believe these to be limited when asking for the scheme rules to be interpreted. As an example, it gives a clear explanation of the AFPS 75 resettlement commutation option and the potential tax efficiencies associated with exercising that option. Similarly, it succinctly explains how AFPS 15 pension commutation works.
These points are not to be considered an endorsement of AI and we firmly believe that the full range of understanding about how your Armed Forces pension benefits work can only be really understood by a human as it currently stands.
Perhaps as time progress AI will become more accurate when consulting it about the various AFPS rules, but at this stage we are not confident that it is correct in all respects. This is particularly the case where you might have complicating factors such as multiple periods of service considered under various different pension schemes.
As ever, we remain on standby to answer members’ questions with fully considered responses.
Andy Keen, Pensions Consultant, Forces Pension Society
