In early 2020, an employment tribunal found that the transition arrangements within the 2015 public service pension schemes, including the Armed Forces Pension Scheme were illegal as a result of age discrimination. This finding has forced the Government to rectify the illegality of the enforced pension transfer.
This was launched in February 2021 with anyone impacted being able to choose how they accrued pension rights between 2015 and 2022. This has can have wide ranging implications for any service personnel and their pension entitlement.
This pension transfer impacted anyone who was in service on or before the 31st March 2012 and on or after the 1st April 2015 within the Armed Forces as they were forced off AFPS75 or AFPS05 on to the 2015 Pension Scheme. This in many instances was detrimental to their pension.
The 05 Scheme (which the vast majority of people were on) was a final salary pension scheme link to the years of service accrued by service personnel. In comparison, the 2015 Scheme was a Career Average Revalued Earnings which is calculated based upon your annual salary.
The overall impact of this was that the pensions achieved were generally less favourable to service personnel.
Reassessing the scheme
However, as a result of the decision in 2020, the Government has had to reassess the transfer of everyone on to the 2015 Scheme. In light of this, the Government have now set out that all service personnel who have left between 2015 and now, and anyone who leaves in the subsequent future who has served pre-2015 and since 2015, will have the option as to which pension scheme they accrue rights under. They will have the option to accrue rights under the 75/05 scheme (depending on which they were on) or 15 Scheme between the period of 1 April 2015 and 31 March 2022. This can have a significant impact on individuals pensions.
It’s very complex and highly dependent on individual circumstances but generally speaking the 05 Scheme will be more beneficial for anyone who serves past 31 March 2022 and has a salary increase after that period in excess of approximately £2,000.
However, the complication comes for anyone who completed their service between 2015 and 2022 or who were medically discharged during this period. These individuals will be given a choice retrospectively as to which pension scheme they wish to have their pension assessed under. It’s anticipated that this will not occur until late in 2021 or early 2022 as a result of the delays and the number of people to which this applies.
Financial advice
The complicating factor for this is that it is very difficult for an individual without any financial knowledge to make an informed decision. Although the Ministry of Defence should give financial advice, it’s almost certainly prudent for anyone who this affects to take further financial advice. If anyone wishes to have such advice provided to them our specialists are able to assist and provide a short report setting out the impact each pension scheme will have on your overall pension so you can make an informed decision as to which is the correct route for you to take. This is significant as in some cases the difference across a lifetime can be as much as £50,000.
If you’d like to have a conversation about your pension with one of our specialists with knowledge of these schemes, who can also help prepare the necessary report, please contact us and we’ll be happy to help.
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