Annex A
Comparison Between Current Armed Forces
Pension Scheme and Proposed Armed Forces Pension Scheme
The attached examples set out a comparison of
the benefits available in the Armed Forces pension arrangements
under:
Existing benefits—paid through the current
Armed Forces Pension Scheme
Proposed benefits—as set out under the Armed
Forces Pension Scheme Review Consultation document dated March
2001.
The examples chosen are intended to illustrate
the main features of the Review proposals and have been produced
by the Government Actuary's Department. They cannot cover every
feature of the Proposals but have been chosen to illustrate the
main effect.
The examples provided are:
| 1. Retirement | a) Officer, 18 years service
|
| b) Officer, 28 years service
|
| c) Other Rank, 22 years service
|
| d) Other Rank, 32 years service
|
| 2. Withdrawal | a) Other rank, 8 years service, lower pay spine (near bottom)
|
| b) Other rank, 8 years service, lower pay spine (middle)
|
| c) Other rank, 8 years service, lower pay spine (near top)
|
| d) Other rank, 8 years service, higher pay spine (near bottom)
|
| e) Other rank, 8 years service, higher pay spine (middle)
|
| f) Other rank, 8 years service, higher pay spine (near top)
|
| 3. Death in Service | Non attributable, Other rank, 10 years service
|
| 4. Ill-health | a) Non attributable, Officer, 10 years service, tier 2 ill-health
|
| b) Non attributable, Officer, 10 years service, tier 3 ill-health
|
| c) Non attributable, Officer, 25 years service, tier 2 ill-health
|
| d) Non attributable, Officer, 25 years service, tier 3 ill-health
|
EXAMPLE 1
RETIREMENT OFFICER
18 YEARS (COMPULSORY
BASIS)—LT
COLONEL (LEVEL
5)
Age at retirement = 40
Service = 18 years
Final Pensionable Salary = £53,888.60
Representative Pay = £53,255.21
Under both the proposed scheme and the existing scheme, such
a member is entitled to take an immediate unreduced pension as
follows.
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Pension (£ pa) | £16,360
| £13,857 |
| Spouse's Death in Retirement Pension (£ pa)
| £8,180 | £6,929
|
| Lump Sum (£) | £49,080
| £41,571 |
| Capitalised Value of Benefits (to nearest £1,000)
| £356,000 | £302,000
|
* This level of pension assumes that the Services decided
that they no longer required the individual's services—it
is paid at the accelerated accrual rate used for the Officer Immediate
Pension point. If the individual had left voluntarily, his pension
would have been paid at the premature voluntary retirement (PVR)
accrual rate, which, at £14,820 per annum, is lower. Other
benefits would also be lower if the individual left under PVR.
This example aims to demonstrate, therefore, the effects of the
difference in the accrual rates and timing of the Immediate Pension
point for Officers.
RETIREMENT OFFICER,
28 YEARS (COMPULSORY
BASIS)—LT
COLONEL (LEVEL
5)
Age at retirement = 50
Service = 28 years
Final Pensionable Salary = £53,888.60
Representative Pay = £55,666.141
Under both the proposed scheme and the existing scheme, such
a member is entitled to take an immediate unreduced pension as
follows.
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Pension (£ pa) | £23,287
| £21,555 |
| Spouse's Death in Retirement Pension (£ pa)
| £11,644 | £10,778
|
| Lump Sum (£) | £69,861
| £64,666 |
| Capitalised Value of Benefits (to nearest £1,000)
| £502,000 | £464,000
|
RETIREMENT OTHER
RANK 22 YEARS—SERGEANT
(LOWER PAY
SPINE, LEVEL
4)
Age at retirement = 40
Service = 22 years
Final Pensionable Salary = £24,356.45
Representative Pay = £25,214.20
Under both the proposed scheme and the existing scheme, such
a member is entitled to take an immediate unreduced pension as
follows.
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Pension (£ pa) | £8,026
| £7,655 |
| Spouse's Death in Retirement Pension (£ pa)
| £4,013 | £3,827
|
| Lump Sum (£) | £24,079
| £22,965 |
| Capitalised Value of Benefits (to nearest £1,000)
| £168,000 | £160,000
|
RETIREMENT OTHER
RANK 32 YEARS—SERGEANT
(LOWER PAY
SPINE, LEVEL
4)
Age at retirement = 50
Service = 32 years
Final Pensionable Salary = £24,356.45
Representative Pay = £25,214.20
Under both the proposed scheme and the existing scheme, such
a member is entitled to take an immediate unreduced pension as
follows.
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Pension (£ pa) | £10,828
| £11,134 |
| Spouse's Death in Retirement Pension (£ pa)
| £5,414 | £5,567
|
| Lump Sum (£) | £32,484
| £33,403 |
| Capitalised Value of Benefits (to nearest £1,000)
| £222,000 | £228,000
|
EXAMPLE 2
WITHDRAWAL OTHER
RANK AFTER
8 YEARS (LOWER
PAY SPINE)—SERGEANT
Age at retirement = 27
Service = 8 years
| Category | Final
Pensionable
Salary
| Representative
Rate
|
| a) Near bottom (Level 2) | £23,520.60
| £25,214.20 |
| b) Middle (Level 4) | £24,356.45
| £25,214.20 |
| c) Near top (Level 6) | £25,298.15
| £25,214.20 |
Under both the proposed scheme and the existing scheme, the
individual would be entitled to a deferred pension and lump sum
payable from age 60.
| Category | Pension Scheme Benefit
| Existing
Arrangements | Proposed
Arrangements
|
| a) Near bottom (Level 2) | Deferred Pension (£ pa)
| £2,690 | £2,688 |
| | Spouse's Pension (£ pa)
| £1,345 | £1,344 |
| | Lump Sum (£)
| £8,071 | £8,065 |
| | Capitalised Value of Benefits (to nearest £1,000)
| £15,000 | £15,000
|
| b) Middle (Level 4) | Deferred Pension (£ pa)
| £2,690 | £2,784 |
| | Spouse's Pension (£ pa)
| £1,345 | £1,392 |
| | Lump Sum (£)
| £8,071 | £8,352 |
| | Capitalised Value of Benefits (to nearest £1,000)
| £15,000 | £15,000
|
| c) Near top (Level 6) | Deferred Pension (£ pa)
| £2,690 | £2,892 |
| | Spouse's Pension (£ pa)
| £1,345 | £1,446 |
| | Lump Sum (£)
| £8,071 | £8,675 |
| | Capitalised Value of Benefits (to nearest £1,000)
| £15,000 | £16,000
|
WITHDRAWAL OTHER
RANK AFTER
8 YEARS (HIGHER
PAY SPINE)—SERGEANT
Age at retirement = 27
Service = 8 years
| Category | Final
Pensionable
Salary
| Representative
Rate
|
| a) Near bottom (Level 2) | £25,663.15
| £25,214.20 |
| b) Middle (Level 4) | £26,645.00
| £25,214.20 |
| c) Near top (Level 6) | £27,681.60
| £25,214.20 |
Under both the proposed scheme and the existing scheme, the
individual would be entitled to a deferred pension and lump sum
payable from age 60.
| Category | Pension Scheme Benefit
| Existing
Arrangements | Proposed
Arrangements
|
| a) Near bottom (Level 2) | Deferred Pension (£ pa)
| £2,690 | £2,933 |
| | Spouse's Pension (£ pa)
| £1,345 | £1,467 |
| | Lump Sum (£)
| £8,071 | £8,799 |
| | Capitalised Value of Benefits (to nearest £1,000)
| £15,000 | £16,000
|
| b) Middle (Level 4) | Deferred Pension (£ pa)
| £2,690 | £3,045 |
| | Spouse's Pension (£ pa)
| £1,345 | £1,523 |
| | Lump Sum (£)
| £8,071 | £9,135 |
| | Capitalised Value of Benefits (to nearest £1,000)
| £15,000 | £17,000
|
| c) Near top (Level 6) | Deferred Pension (£ pa)
| £2,690 | £3,164 |
| | Spouse's Pension (£ pa)
| £1,345 | £1,582 |
| | Lump Sum (£)
| £8,071 | £9,491 |
| | Capitalised Value of Benefits (to nearest £1,000)
| £15,000 | £18,000
|
EXAMPLE 3
DEATH IN
SERVICE (NON-ATTRIBUTABLE)
OTHER RANK
AFTER 10 YEARS—SERGEANT
Age at death = 28
Service = 10 years
Final Pensionable Salary = £24,356.45 (Lower Pay Spine,
Middle)
Representative Pay = £25,212.35
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Spouse's Pension (£ pa) | £2,446
| £4,088 |
| Lump Sum (£) | £24,456
| £73,069 |
| Capitalised Value of Benefits (to nearest £1,000)
| £42,000 | £103,000
|
EXAMPLE 4
ILL-HEALTH
(NON-ATTRIBUTABLE,
TIER 2) OFFICER
AFTER 10 YEARS—COLONEL
Age at retirement = 31
Service = 10 years
Final Pensionable Salary = £62,400.40 (level 5)
Representative Pay = £65,521.15
Ill-health tier = 2 (unable to do job, earnings capacity
reduced)
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Member's Pension (£ pa) | £13,811
| £16,046 |
| Spouse's Pension | £6,906
| £8,023 |
| Lump Sum (£) | £41,433
| £48,137 |
| Capitalised Value of Benefits (to nearest £1,000)
| £288,000 | £335,000
|
ILL-HEALTH
(NON-ATTRIBUTABLE,
TIER 3) OFFICER
AFTER 10 YEARS—COLONEL
Age at retirement = 31
Service = 10 years
Final Pensionable Salary = £62,400.40 (level 5)
Representative Pay = £65,521.15
Ill-health tier = 3 (unable to do job, permanently incapable
of further employment)
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Member's Pension (£ pa) | £13,811
| £19,612 |
| Spouse's Pension | £6,906
| £9,805 |
| Lump Sum (£) | £41,433
| £58,835 |
| Capitalised Value of Benefits (to nearest £1,000)
| £288,000 | £409,000
|
ILL-HEALTH
(NON-ATTRIBUTABLE,
TIER 2) OFFICER
AFTER 25 YEARS—COLONEL
Age at retirement = 46
Service = 25 years
Final Pensionable Salary = £62,400.40 (level 5)
Representative Pay = £60,841.85
Ill-health tier = 2 (unable to do job, earnings capacity
reduced)
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Member's Pension (£ pa) | £24,741
| £24,960 |
| Spouse's Pension | £12,371
| £12,480 |
| Lump Sum (£) | £74,224
| £74,880 |
| Capitalised Value of Benefits (to nearest £1,000)
| £486,000 | £490,000
|
ILL-HEALTH
(NON-ATTRIBUTABLE,
TIER 3) OFFICER
AFTER 25 YEARS—COLONEL
Age at retirement = 46
Service = 25 years
Final Pensionable Salary = £62,400.40 (level 5)
Representative Pay = £60,841.85
Ill-health tier = 3 (unable to do job, permanently incapable
of further employment)
| Pension Scheme Benefit | Existing
Arrangements
| Proposed
Arrangements
|
| Member's Pension (£ pa) | £24,741
| £26,297 |
| Spouse's Pension | £12,371
| £13,149 |
| Lump Sum (£) | £74,224
| £78,892 |
| Capitalised Value of Benefits (to nearest £1,000)
| £486,000 | £517,000
|
|
