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Discuss Pension Terms in UPO on Navy Net; Some Pension terminology that may be useful (perhaps it could be made a 'sticky'?) Abatement Where payments (eg of pension) are reduced in certain circumstances. Accrued Benefits/Pension Rights The pension benefits or rights a member ...
- 03-04-12, 18:56 #1
- Join Date
- Apr 2008
- Watching the Boats going backwards and forwards
Some Pension terminology that may be useful (perhaps it could be made a 'sticky'?)
Where payments (eg of pension) are reduced in certain circumstances.
Accrued Benefits/Pension Rights
The pension benefits or rights a member has built up at a particular date.
The rate at which pension benefits build up.
An arrangement in which a member makes a contribution to buy extra years of service to reckon in the calculation of their final pension and lump sum and/or that of their dependants.
Annual Allowance (AA)
The limit on what can be added each tax year to the value of the pension without a tax charge. It is set at £215,000 in tax year 2006/07, rising in stages to £250,000 in 2010/11. The rule is that when added together, the increase in the value of an individual’s pension’s savings in any input period may not exceed the AA. Any excess over the AA is taxed at 40% which is due as a lump sum when the tax liability is calculated.
Armed Forces Attributable Benefits (AFAB) Scheme
The attributable benefits payable under AFPS 75 will be replaced by AFAB during 2007 to create a stand-alone compensation scheme for injuries, illnesses and deaths caused by service on or before 5 April 2005. AFAB is being introduced to continue to provide cover to Service personnel if they are medically discharged from the Services (regardless of whether they are members of AFPS 75 or AFPS 05) and their surviving dependants. See www.armedforcespension.mod.uk for more information.
Armed Forces Compensation Scheme (AFCS)
This is a compensation scheme for all members of the Regular and Reserve Forces. It provides compensation for all injuries, ill-health and deaths due (attributable) to service, the cause of which occurred on or after its introduction on 6 April 2005. See AFCS booklet “Your Compensation Scheme Explained” – MMP/125.
AFPAA – Armed Forces Personnel Administration Agency
They are the scheme administrators for all the Armed Forces pension schemes (AFPS 75, AFPS 05 and RFPS).
Note: See Service Personnel and Veterans Agency (SPVA)
Armed Forces Pension Scheme 1975 (AFPS 75)
This is the pension scheme for Service personnel which was introduced in 1975 and was closed to new entrants from 6 April 2005.
Armed Forces Pension Scheme 2005 (AFPS 05)
This is the pension scheme for Regular Service personnel. It is effective for new entrants from 6 April 2005 and, from 6 April 2006 for Service personnel who were in service on that date and who elected to transfer from AFPS 75 as a result of the Offer To Transfer.
When an injury or illness is significantly hastened or worsened by service in the Armed Forces.
Add together pension benefits arising from two or more periods of service in the Armed Forces.
A court order instructing the Scheme managers to pay all or part of a pension in payment to a member’s spouse or civil partner as part of a divorce settlement.
The term generally used to describe where:
- an injury or illness was caused, or aggravated, by service;
- a death was caused, or significantly hastened, by service.
See also Armed Forces Attributable Benefits (AFAB),
Armed Forces Compensation Scheme (AFCS) and War Pensions Scheme (WPS).
Attributable benefits are not paid under AFPS 75 which offers invaliding pensions whatever the cause of the condition. Benefits are paid under two schemes depending on the date when the injury or condition was caused. See also: Armed Forces Compensation Scheme (AFCS) and War Pensions Scheme (WPS).
Additional Voluntary Contributions (AVCs)
Tax deductible payments made by a Scheme member to enhance their pension or death benefits.
A payment made from one pension scheme to another at the individual’s request to allow the receiving scheme to provide alternative benefits. This transfer is made when an individual changes employment.
Bonus payments replace the Early Departure Payments (EDP) for members of AFPS 05 for certain specialisations, eg medical and dental officers, thus encouraging these specialists to stay rather than paying them to leave.
CETV – Cash Equivalent Transfer Value
A payment (reflecting the value of the rights an individual has in that scheme) made from one pension scheme to another to buy benefits in the receiving scheme. This transfer may only be made, at the individual’s request, when he changes from one pension scheme to another.
An individual who has formed a legally recognised partnership with another person of the same sex under the procedure provided by the Civil Partnership Act 2004.
If the civil partnership is legally dissolved, the former civil partner is not entitled to benefits.
The arrangement under which a pension scheme leaves the State Second Pension Scheme (S2P). This means AFPS 75 and AFPS 05 members exchange their entitlements to benefits under the S2P for alternative benefits and National Insurance contributions are paid at a lower “contracted-out” rate.
A final decree granted by a court of law which ends a marriage and so ends entitlements to a spouse’s pension benefits.
· For AFPS 75 members – deferred members are those who leave before the Immediate Pension Point. Their benefits are preserved until age 60 for service built up before 6 April 2006 and age 65 for service built up after 6 April 2006. There is an opportunity for all benefits to be taken at age 60 but they will be actuarially reduced to reflect the early payment.
· For AFPS 05 members – Benefits that are preserved until age 65 for a former member of the Armed Forces who left before the age of 55.
Defined Benefits Scheme
A scheme where benefits are based on a proportion of the member’s final pensionable pay at retirement for each year of pensionable service. AFPS 75 and AFPS 05 are defined benefits schemes.
- For AFPS 75 members – a member’s spouse or civil partner or children. For attributable benefits only, this may include an eligible partner.
- For AFPS 05 members – a member’s spouse, civil partner, eligible partner or eligible children.
A court order made as part of a divorce or legal separation settlement instructing the scheme to pay all or part of a member’s pension and/or tax-free pension lump sum to the member’s former spouse or civil partner when these benefits become payable in the future. The same arrangements will apply when a civil partnership is dissolved. These orders are sometimes known as ‘Attachment Orders’ when the member’s pension is already in payment at the time of the Order.
EDP – Early Departure Payments
Payments to personnel who leave service before age 55, after a minimum of 18 years’ service AND who are at least age 40 (the EDP 18/40 Point). Payments are made up of a tax-free lump sum equal to three times the value of the preserved annual pension and an income payment equal to at least 50% of the preserved pension. Medical and Dental Officers are not normally eligible for EDPs as they are under the bonus scheme instead.
EDP Lump Sum
This is a tax-free lump sum equal to three times the value of the preserved annual pension payable under the Early Departure Payments Scheme after reaching
the EDP 18/40 Point.
For AFPS 75 members – a child/children whose parents were married when he or she was born and born no later than 12 months after the member’s
death. In certain circumstances the definition can include a child/children whose parents are not married when they were born, a stepchild/children, an adopted child/children (further details of eligible children, including children of unmarried partners, can be obtained from SPVA(GL). In all cases, the child/children must be financially dependent on the AFPS member and aged 16 or under or receiving full-time education or training, or not able to support themselves due to disability. The disability must have been present before the member’s death.
Children born of a relationship entered into after the member leaves the Armed Forces are not eligible for benefits under the AFPS 75.
For AFPS 05 members – Any child who is financially dependent on the member, who is:
· under 18, or
· in full-time education or vocational training and is under 23, or
· unable to engage in employment because of physical or mental disability which was present at the time of the member’s death and began before the age of 23.
This includes children born within one year of the member’s death.
For AFPS 75 members - Eligible partners of members who gave pensionable service on or after 15 September 2003, may be eligible for attributable benefits under AFAB where the death of the member is caused by service and the relationship was substantial (see also substantial relationship). Benefits are not payable to eligible partners where the death is not found attributable.
For AFPS 05 members - Someone with whom a member is cohabiting, in an exclusive (ie neither partner is married or a civil partner to someone else) and substantial relationship with financial and wider inter-dependence (this is not the same as a civil partnership) and they are not prevented from marrying or forming a civil partnership.
Final Pensionable Pay
For AFPS 05 members - The greatest amount of pensionable earnings (excluding allowances and any form of specialist pay) received for 365 consecutive days over the last three years of service.
For AFPS 75 members - The highest paid rank held for more than two years in the last five years of service in the case of other ranks, and the highest substantive (permanent) rank held for more than two years or the highest paid acting rank held for three years in the case of officers.
Full Career (Maximum) Pension
For AFPS 75 members – a pension paid at age 55 after 34 years’ reckonable service as an Officer or 37 years’ reckonable service as an Other Rank.
GMP – Guaranteed Minimum Pension
The minimum pension that a scheme like AFPS 75 and AFPS 05 are obliged to provide to members as a result of contracting out of S2P formerly SERPS.
A pension awarded to an eligible scheme member who is medically discharged from the Armed Forces. Award is not conditional on service being the cause of the illness or injury giving rise to discharge.
Immediate Pension (IP)
For AFPS 75 members only – A pension paid immediately on leaving the Armed Forces after 16 years’ reckonable service as an Officer or 22 years’ reckonable service as an Other Rank.
Annual increase in pension value in line with movements in the Retail Prices Index (RPI). Changes are made in April, using the previous September’s annual headline rate of inflation. All ill-health pensions, pensions payable from age 55 and dependants’ pensions are index-linked from the date of payment with the exception of Immediate Pensions (IPs) and Early Departure Payments (EDPs). Preserved pensions are index-linked using prices since the date of leaving the service.
For AFPS 75 members – the Immediate Pension (IP) is not index-linked until age 55.
For AFPS 05 members – Early Departure Payments (EDP) are not index-linked until age 55.
The process where an individual is medically discharged from the Armed Forces because they are unable to do their service job due to ill-health. Invaliding applies to individuals whether or not their ill-health or injury is attributable to their Armed Forces service. Invaliding does not mean that the individual could not be employed in other forms of full or part-time civilian employment (also referred to as medical discharge).
For AFPS 05 members only – exchanging all or part of the member’s tax-free pension lump sum for an increase in the amount of taxable pension payable to
the member and their dependants.
For AFPS 75 members only – the surrender, for the remainder of the member’s life, of part of their pension in exchange for the payment of a tax-free lump sum. For Other Ranks this must be to finance a specific, approved project. It only applies to those who gave service on or before 31 March 1978 and in respect of service up to 6 April 1980.
Life Time Allowance
The limit on total pension savings eligible for tax relief. The limits for the tax years 07/08 – 10/11 are:
- £1.6M in 07/08
- £1.65M in 08/09
- £1.75M in 09/10
- £1.8M in 10/11
A person who has joined AFPS 75 or AFPS 05 and who is earning benefits under one of the schemes, has a preserved pension under one of the schemes, or is receiving a pension under one of the schemes.
This term is used to describe an injury, illness or death that was NOT mainly caused or made worse by service in the Armed Forces.
Benefits payable if a member is discharged from the Armed Forces on non-attributable ill-health grounds with a minimum of two years’ reckonable service. These benefits can only be awarded at the time of medical discharge from the Armed Forces. Only Scheme members qualify for these benefits; those who have
opted out are not eligible.
For AFPS 75 members – a Service Invaliding Pension is paid based on the length of service. For those with more than five years’ reckonable service this is enhanced. A
terminal grant is also paid worth three times the pension.
For AFPS 05 members – there is a three-tier arrangement depending on the severity of the condition.
Normal Retirement Age
Retirement ages will continue to be tied to Service career structures. For most (but not all) of the Armed Forces this is age 55.
Pension Guarantee (early death in retirement)
For AFPS 05 members only – if death occurs within five years of the pension coming into payment, a tax-free lump sum payment equivalent to the balance of five
years’ pension at its current rate, less the lump sum already received, will be payable to the spouse, civil partner or eligible partner. The spouse’s, civil partner’s or partner’s pension will be based on the pensionable service used to calculate the member’s pension.
Basic pay including the X factor but excluding allowances, bonuses, financial retention incentives, loan service pay and any form of specialist pay.
The rights arising from a share of the value of the Scheme member’s pension rights as a result of a Pension Sharing Order (PSO).
For AFPS 75 members – The pension is payable from age 60 for PSOs sealed before 6 April 2006 and from age 65 for PSOs sealed after this date.
For AFPS 05 members – The pension is payable from age 65.
The reduction of a Scheme member’s pension rights by a certain percentage as a result of a Pension Sharing Order (PSO).
Pension Lump Sum
A one-off lump sum (normally tax-free) equal to three times the annual pension awarded. The pension lump sum is paid in addition to the pension when the pension first comes into payment.
Pension Sharing Order (PSO)
An order made by a court on divorce or dissolution of a civil partnership creating pension rights for a former spouse or civil partner out of the benefits in the Scheme which the member has built up at the time that the Pension Sharing Order is made. The value of the pension will depend on the percentage specified in the PSO.
AFPS 75 Members - PSOs sealed before 6 April 2005 are payable at age 60 but PSOs sealed after that date are not payable until age 65.
AFPS 05 Members PSOs are payable at the age of 65.
For AFPS 75 members – Benefits due to a member after a minimum of two years’ service and before the Immediate Pension Point, or a transfer in from another scheme. The preserved pension is payable at the age of 60 for service before 6 April 2006 and age 65 for service after that date.
For AFPS 05 members – Benefits due to a member leaving AFPS 05 before age 55 after a minimum of two years’ service or a transfer in from another scheme. The preserved pension and pension lump sum are payable at the age of 65.
This includes: paid service in the Armed Forces; service transferred in from another scheme; any period of service with NATO/UN or similar collaborative arrangement in respect of which the member has repaid all elements of their severance payment to buy back the service they missed whilst on secondment, supplemented by a ‘top up’ from the project which sent them.
For AFPS 75 members - Only actual service counts towards an Immediate Pension. Transferred-in service does not count towards Qualifying Service for an Immediate Pension.
Reckonable service is the service which is used to calculate a member’s pension.
For AFPS 75 members – Reckonable service is the service which counts towards a member’s pension. For Officers this starts from the age of 21(or date of entry if later) for a maximum of 34 years and for Other Ranks at age of 18 (or date of entry if later) for a maximum of 37 years.
For AFPS 05 members – Reckonable service is the service which counts towards a member’s pension. This starts from the first day of paid service in the Armed Forces, but may not exceed 40 years.
The value of any pension benefits transferred in from another scheme increases the service which counts towards a member’s final pension and therefore counts towards the two year minimum required to qualify for pension benefits. Credit resulting from the purchase of added years also counts towards reckonable service for full career and preserved pensions. For those who transferred from AFPS 75 as a result of the Offer To Transfer, their service under AFPS 75 will count too. Certain absences are not reckonable for pension purposes, such as a period of detention, unauthorised absence or unpaid leave
Note: Only actual service counts towards an Immediate Pension. Transferred-in benefits and credits resulting from the purchase of added years do not count towards reckonable service for an Immediate Pension..
AFPS 75 members - Unlike most final salary-related pensions, AFPS 75 pensions for members below 1 star level (Commodore, Brigadier, Air Commodore) are not based on individual earnings but on a representative rate of pay for each rank. This “all of one company” principle means that all those of the same rank with the same length of service retiring in the same year receive the same rate of pension, regardless of their actual earnings.
Reserve Forces Pension Scheme (RFPS)
Those who start or restart on Full Time Reserve Service (FTRS), including Additional Duties Commitment (ADC) terms on or after 6 April 2005, will automatically be members of the RFPS. Personnel called out for service under section 32,43,52,54 or 56 of the Reserve Forces Act 1996, (or a corresponding section of the Reserve Forces Act 1980) from that date may choose to become members of RFPS. Those in service before 6 April 2005 and still in service on 6 April 2006, were given the opportunity to transfer to this scheme.
For AFPS 75 members only – this means the surrender of part of the Immediate Pension to obtain an additional tax-free lump sum, with the restoration of pension in full at the age of 55. This applies to both Officers and Other Ranks who gave service on or after 31 March 1978.
Resettlement Grants (RG)
A tax-free lump sum payable to personnel who leave the Regular Armed Forces having given the required service under AFPS 75 or AFPS 05, and who are not eligible for benefits under the pension scheme or EDP scheme, apart from a preserved pension.
Retail Prices Index (RPI)
This is published monthly to measure the change in price levels. Used to increase the value of pensions in April.
The Government Actuary’s Department provides actuarial advice to the Scheme.
Service Personnel Policy (Pensions), (SP Pol Pens), an MOD branch, manages the Armed Forces pension schemes.
Short Term Pension
For AFPS 75 members only – a short term pension is payable to a widow(er), eligible partner and/or eligible child immediately after the death of a member. This pension is based on the member’s annual rate of pay when death occurs in service, or the annual rate of pension in payment when death occurs in retirement. The pension is paid for either 91, 182 or 273 days depending on the number of dependent children,
pensionable terms and whether or not the death is attributable to service.
Service Personnel and Veterans Agency (SPVA)
From 4 April 2007, AFPPA and the Veterans Agency (VA) merged to become a single Agency and changed their name to the Service Personnel and Veterans Agency (SPVA). However, the work done by the different parts of the Agency will remain the same. SPVA (GL) will continue to be responsible for the administration of AFPS 75, AFPS 05, RFPS and AFAB and SPVA (NC) will continue to be responsible for the administration of AFCS and WPS.
A legally married (including separated, but not divorced) husband or wife; not an unmarried partner.
State Second Pension Scheme (S2P)
This is part of the State provision of retirement benefits. It is earnings-related and paid on top of the State Pension, and from April 2002, replaced the former State Earnings Related Pension Scheme – SERPS. It is available to employees who pay National Insurance contributions. If a pension scheme is contracted out of the S2P (like AFPS 75 and AFPS 05) this means that the scheme guarantees to ensure that the benefits members will receive at normal retirement age will equal or exceed what they would have had from the State. Because they are contracted out of S2P, members pay a reduced National Insurance contribution to the State.
Surviving Spouse/Civil Partners’ Benefits (formerly known as Widow/Widower) Benefits
The person to whom a member is legally married or has a legally recognised partnership when he/she dies. A former spouse or civil partner is not eligible to receive pension benefits, however, a separated spouse or civil partner may qualify if not cohabiting with a new partner.
To establish whether a relationship is substantial various factors are taken into consideration, such as: whether there are children of the relationship, financial
dependence or interdependence, shared commitments such as a mortgage, whether one partner is the prime beneficiary of the other’s will, shared accommodation, the length of the relationship and whether the relationship is exclusive that is, there is no legal spouse or civil partner (on either side).
Terminal Grant (TG) (Pension Lump Sum)
For AFPS 75 members – A one off lump sum equal to three times the annual pension awarded. The pension lump sum is paid in addition to the pension when the pension first comes into payment and is normally tax free.
A term used to describe any benefit arising from the termination of service in the Armed Forces.
A payment (called a Cash Equivalent Transfer Value or CETV reflecting the value of the rights an individual has in that scheme) made from one pension scheme to another to buy benefits in the receiving scheme. This transfer may only be made at the individual’s request, when they change from one pension scheme to another.
War Pensions Scheme (WPS)
The WPS may pays benefits to an individual when they have left the Armed Forces where an injury, illness or death was caused, made worse or hastened by service in the Armed Forces before 6 April 2005.
Hope this is helpful to someoneGive a man a fish and he'll feed his family for a day,
teach a man to fish and he'll sit round on a boat all day drinking beer.