106/2012 - New Armed Forces pension proposed
Armed Forces personnel will continue to receive one of the best and most valuable public service pensions, under a new scheme proposed today by the Ministry of Defence.
The scheme will also deliver on the approach set out in Lord Hutton’s Independent Public Service Pensions Commission to reform pensions and ensure that they are more affordable and sustainable for the long-term. Changes will not affect accrued rights of those currently serving or the age at which their accrued benefits can be drawn.
Unlike other public service pension schemes, Service personnel will still not have to make personal contributions, and will still receive a lump sum if they leave the Armed Forces at 40 if they have served the required number of years, again unlike any other public service pension. The Normal Pension Age will be 60, whereas for other public service pensions the Normal Pension Age will be linked to the State Pension Age, which is considerably higher.
Minister for Defence Personnel, Welfare and Veterans Andrew Robathan said:
The Government has had to make some tough decisions to ensure sustainable public service pensions which provide a fair deal for both service personnel and for the taxpayer. We recognise the unique commitment made by the Armed Forces and we have done all we can to protect them and make these changes in the fairest way possible. The proposed new scheme will remain among the very best available in the public or private sector, with no individual contributions required by Service personnel.
Benefits of the proposed new scheme include:
- It creates one scheme for all – including Reservists. There are currently several different Armed Forces pension schemes;
- Service personnel won’t have to make any personal contributions to their pension;
- Service personnel will receive a tax-free lump sum and monthly income if they leave the Armed Forces at 40 and have served for over 20 years. No other public service makes any pension payment that early;
- As recommended by Lord Hutton, the Normal Pension Age will be 60 – considerably lower than other public service pensions;
- Accrued pension rights have been protected so there is no change to the age at which those currently serving can draw their accrued benefits, which are based on final rank and salary;
- It is in line with Lord Hutton’s recommendations and other public service schemes, moving to a pension based on career average earnings, rather than final salary; and
- All members of the Armed Forces Pension Scheme who were within ten years of their Normal Pension Age on 1 April 2012 will receive transitional protection and see no change in their pension age or the amount they receive at retirement.
The scheme was designed after extensive consultation with over 17,500 personnel both in the UK and overseas including Afghanistan, Germany, Gibraltar and the Falkland Islands.
There will now be a further period of consultation for personnel to make comments before the new scheme design is finalised.
Notes to editors
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In 2010 the Government announced it would be reforming all public service pensions and later accepted the Independent Public Service Pensions Commission’s recommendations to make them fair and sustainable.
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The Ministry of Defence began an Armed Forces Pension Scheme consultation exercise at the end of March 2012 to set out the reasons for change and invite views from Service personnel and external stakeholders.
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Today, the Ministry of Defence has published the Outline Scheme Design, which sets out the key features of the new scheme. The document is primarily aimed at Service personnel and external stakeholders, including the Forces’ Families Federations, the Forces Pension Society and the Royal British Legion. There will now be a further period of consultation for personnel to make comments before the new scheme design is finalised.
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Following this further period of consultation, a new Armed Forces Pension Scheme will be introduced from April 2015. All those serving when the new scheme is introduced will be automatically enrolled unless they qualify for transitional protection.
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The total cost of the new Armed Forces Pension Scheme is 31.5 per cent of pensionable pay, which is all borne by the Exchequer, as there are no employee contributions.
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A copy of the consultation document can be found at: http://www.mod.uk/DefenceInternet/AboutDefence/CorporatePublications/ConsultationsandCommunications/PublicConsultations/TheNewArmedForcesPensionSchemeFinalConsultation.htm
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For further media enquiries please call Robert Mead at the Ministry of Defence press office on 020 7218 7924.