Forces Pension Society

Fighting for the forces and their families

AFPS75 and AFPS15 – Commutation or inverse commutation? Beware the Pens form 1!

May 11, 2018
Confusion

Pens Form 1 is the one you fill in when you leave the service in order to claim your pension and it is the subject of a growing mailbag, very often from those who have made a mistake when filling it in.

Commutation and inverse commutation are particular areas of concern/confusion.

  • Commutation means increasing your tax free lump sum by giving up some of your (taxable) pension.
  • Inverse commutation is the opposite – you give up some or all of your lump sum in order to increase your income (either pension or EDP income).

So if you want to maximise your tax free lump sum, tick the boxes offering resettlement commutation (AFPS75 only), do not tick that you want to take inverse commutation. To make matters worse the Pens Form 1 gives an option at PART H:

I want to commute my AFPS15 pension to raise a tax-free lump sum and have completed AFPS Form 9.          Yes               No

This sounds attractive, but the option is only available to members who are approaching age 60 or state pension age (SPA) (ie when the AFPS15 pension becomes payable). If you are leaving before age 60 we recommend that you simply answer no to this question.

Members can telephone our pensions enquiry team for assistance with completion of the Pens Form 1- much better than trying to unpick a mistake retrospectively.

 

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