The Armed Forces Pension Scheme (AFPS) provides retirement, ill-health, and death benefits to members of the British Armed Forces — the Royal Navy, the British Army, and the Royal Air Force. Unlike most other UK pension schemes, the AFPS is non-contributory: serving personnel do not pay employee contributions. The current scheme, AFPS 2015, is a career average defined benefit arrangement with a normal pension age of 60, making it distinct from other public sector schemes where the pension age is linked to the State Pension age.
AFPS 2015: The Current Scheme
AFPS 2015 came into effect on 1 April 2015 and covers all serving regular and reserve personnel. It is a career average revalued earnings (CARE) scheme. Each year, 1/47th of your pensionable earnings is banked as pension. These annual amounts are revalued each year in line with average earnings, ensuring your pension keeps pace with wage growth rather than just price inflation.
A key feature that sets AFPS 2015 apart from other public sector schemes is the normal pension age of 60 — not the State Pension age. This reflects the physical demands of military service and the typical career patterns of Armed Forces personnel.
Legacy Schemes: AFPS 75 and AFPS 05
Before AFPS 2015, two legacy schemes were in operation. Understanding these is important if you served before April 2015.
Comparison of Armed Forces Pension Schemes
| Feature | AFPS 75 | AFPS 05 | AFPS 2015 |
|---|---|---|---|
| Pension type | Final salary | Final salary | Career average (CARE) |
| Accrual rate | 1/70th | 1/70th | 1/47th |
| Automatic lump sum | Yes (3x pension) | No | No |
| Normal pension age | 55 | 65 | 60 |
| Employee contributions | None | None | None |
| Revaluation | Final salary link | Final salary link | Average earnings |
McCloud Remedy and Transitional Provisions
Following the McCloud legal ruling, which found that transitional protections offered to older members when the 2015 reforms were introduced amounted to age discrimination, a remedy has been implemented. Members who were in a legacy scheme on 31 March 2012 and remained in service until 1 April 2015 will have their service between 1 April 2015 and 31 March 2022 assessed under both legacy and 2015 scheme rules. At retirement, they will receive whichever calculation is more beneficial.
How Benefits Accrue
In AFPS 2015, you accrue a pension of 1/47th of your pensionable earnings each year. This is a more generous accrual rate than most other public sector schemes (the NHS uses 1/54th, teachers use 1/57th). For example, if you earn £35,000 in a year, you build up £744.68 of annual pension for that year. Each year's accrual is revalued in line with average earnings growth until you reach pension age.
The scheme is non-contributory, meaning the full cost is borne by the Ministry of Defence. You do not pay any employee contributions, which effectively gives you an even higher net benefit compared to other public sector schemes where members contribute between 5% and 14% of salary.
Early Departure Payment (EDP)
The Early Departure Payment is a unique feature of the Armed Forces pension arrangements, designed to bridge the gap between leaving the military and reaching pension age. If you serve for at least 20 years and leave at age 40 or over, you qualify for the EDP.
Early Departure Payment (EDP) Key Facts
- Qualifying service
- 20 years minimum
- Minimum age
- 40
- EDP lump sum
- 2.25x annual pension
- EDP income
- 34% of deferred pension (at 20 years)
The EDP income percentage increases for each additional year of service beyond 20 years. At 20 years you receive 34% of your deferred pension as an ongoing income, rising for each extra year. The full deferred pension then comes into payment at age 60.
Resettlement Grants and Terminal Benefits
When you leave the Armed Forces, you may be entitled to a resettlement grant if you have completed at least 12 years of service (or 9 years for those who joined before certain dates). This is a tax-free lump sum designed to help with the transition to civilian life. The amount varies based on your rank and length of service.
If you leave before qualifying for the EDP (fewer than 20 years' service or under age 40), your pension benefits are deferred until you reach pension age — 65 for AFPS 05 benefits or 60 for AFPS 2015 benefits.
Tax-Free Lump Sum Commutation
In AFPS 2015 and AFPS 05, there is no automatic lump sum. However, at pension age you can commute part of your annual pension for a tax-free lump sum. The commutation rate is 12:1 — for every £1 of pension you give up, you receive £12. The maximum lump sum is generally 25% of the capital value of your pension benefits.
In AFPS 75, an automatic lump sum of three times the annual pension is provided, with no option to commute further pension for additional lump sum.
Death-in-Service and Dependant Benefits
- Death-in-service lump sum: A lump sum of four times pensionable pay is payable if you die while in service — one of the most generous death-in-service benefits of any UK pension scheme.
- Attributable death: If death is attributable to service, enhanced benefits may apply, including a higher lump sum and a guaranteed income payment (GIP).
- Survivor pension: A pension is payable to your surviving spouse, civil partner, or eligible partner.
- Children's pension: Pensions may be payable to eligible dependent children.
Invalidity Benefits
If you are medically discharged from the Armed Forces, you may be entitled to invalidity benefits through the AFPS. The level of benefit depends on whether your condition is attributable to service and the degree of disablement. Benefits can include an enhanced pension, a lump sum, and a guaranteed income payment. The Armed Forces Compensation Scheme (AFCS) provides additional payments for injury, illness, or death caused by service from 6 April 2005 onwards.
Veterans' Pension Considerations
After leaving the military, your pension situation changes significantly. You may have a deferred AFPS pension, an EDP income, or an immediate pension depending on your length of service and age at departure. Key considerations for veterans include:
- Bridging the gap: If you leave before EDP age, you may need to fund the gap between leaving and pension payment date.
- Civilian pension: Building a second pension in civilian employment to supplement your military pension.
- State Pension: Checking your National Insurance record, especially if you had gaps or overseas postings that may affect your entitlement.
- Tax planning: Understanding how your military pension, civilian income, and State Pension interact from a tax perspective.
How a Financial Adviser Can Help
The transition from military to civilian life is one of the most significant financial changes you will experience. A financial adviser with experience in Armed Forces pensions can help you:
- Understand your benefits: Clarify what you are entitled to from AFPS 75, AFPS 05, and/or AFPS 2015, including the McCloud remedy choices.
- Plan for resettlement: Create a financial plan that covers the transition period and builds towards long-term goals.
- Build supplementary savings: Advise on additional pension or investment options to complement your military pension.
- Commutation decisions: Model whether taking a lump sum at pension age is in your best interest.
For broader retirement planning guidance, see our retirement planning guide. If you are considering transferring your AFPS benefits (which is not normally possible for AFPS 75 and rarely done for later schemes), read our pension transfers guide.
This guide is for general information only and does not constitute financial advice. The information is based on publicly available data from the Ministry of Defence, the Armed Forces Pension Scheme, and other government sources. Always seek professional advice before making financial decisions. Figures and thresholds are subject to change — check official sources for the latest values.