Armed Forces Pension Scheme 2005 (AFPS 05)
AFPS 05 was introduced by the Secretary of State for Defence through the Armed Forces (Pension and Compensation) Act 2004 which came into force on 6 April 2005. Those who were already serving on this date were given the opportunity to transfer to the new scheme. Less than 10 % did so. The scheme saved no money but changed the incentives at certain stages in careers, so transfer was beneficial to some and not to others. All new recruits who joined after April 2005 were automatically enrolled onto the new scheme.
Serving sailors, soldiers and airmen had to select whether to join the new scheme or stay in the old one with an effective date of April 2006, It was a difficult decision as each scheme had its merits and whether or not it was better to transfer very much depended on individual circumstances and future career prospects which were not always easy to predict. Although everyone affected was supplied with an information pack through the chain of command there was a perception that because the emphasis was very much on ensuring that the decision to transfer was an individual’s choice; many felt that the implications were not adequately explained to those serving.
AFPS 05 scheme has the following main features:
- Like its predecessor it is a defined benefit final salary scheme.
- It is based on your best 365 days pay in the last 3 years of service.
- It is based on all the time you have served (up to 40 years maximum).
- Eligibility begins the moment you sign on at whatever age.
- Widows’ benefits are up to 62.5% of spouses’ pension.
- Death in service grant is 4 times salary.
- The old immediate pension is replaced by an Early Departure Payment from the 18 years of service (or age 40) point for all ranks, which gives only a percentage of the full pension until age 65, when the full value is payable. But two lump sums are also payable one on exit and the second at 65.
In summary AFPS 05 favours a long service career, and has a much improved dependant’s package.