It is apparent from our work with Veterans’ Gateway that there is much confusion amongst AFPS75 members about how pension benefits are paid.
The following outlines how AFPS75 pension benefits are structured:
If you left with an Immediate Pension, your pension and lump sum were payable immediately. There is nothing else to claim but, when you are 55, your pension will increase by all the inflation increases (Pension Increases or PIs) that occurred since you retired. If you took Resettlement Commutation, your pension is restored to its pre-commutation value and PIs are added.
If you left with an Invaliding Pension, your pension and lump sum were payable immediately. PIs are paid annually and there is nothing else to claim.
If you left before 6 April 2006 with preserved benefits, your pension and lump sum are payable at age 60. There is no flexibility about how this pension is paid: it is an annual taxable amount paid in 12 monthly instalments and a one-off tax-free lump sum worth three times the pension. You cannot commute or just ‘cash it in’.
If you left on or after 6 April 2006 with preserved benefits, they will be paid in two parts. The benefits earned up to 6 April 2006 will be paid at age 60 and the balance at age 65. This is a bit confusing so here is a simple example -
Fred leaves with a preserved pension of £8K and a lump sum of £24K. 3/4 of his service was before 6 April 2006 and the balance after that date. That means he would receive a pension of £6k and a lump sum of £18K (plus PIs) at age 60 and an additional £2K pension and a lump sum of £6K (again, plus PIs) at age 65.
Fred could ask for the part payable at 65 to be paid at age 60 but it would be paid at a reduced rate to take account of the fact that is will be in payment for 5 years longer than would normally be the case. That is the only flexibility about how these pension benefits are paid. You cannot commute or just ‘cash it in.
The only time preserved benefits can be accessed before age 60 is in the event of permanent ill-health preventing full time work. This is an expensive provision as the pension is paid at its full rate and includes PIs. Veteran UK will gather evidence from GPS and consultants to validate it. If granted, the pension will be back dated to the date of the claim.