Glossary
Abatement
is a reduction. The high level of the Armed Forces Pension Scheme
as compared to Armed Forces Pay Review Body (AFPRB) comparators
is currently reflected in the 7% abatement of pay.
Accrual Rate is the rate
at which pension benefits are built up over time.
Accrued benefits/pension rights
are the pension benefits or rights a member has built up at a
particular date.
Actuarial assumptions
are estimates made in order to calculate the cost of providing
benefits. Possible variables include life expectancy, interest
rates, and compensation claims.
Armed Forces Pension Scheme (AFPS)
is the pension scheme currently in place for armed forces personnel.
Attributable benefits
are those payable where a Service person's medical condition,
injury or death is caused or aggravated by service in the Armed
Forces.
Death-in-Service Lump Sum
is part of the occupational benefits of the pension scheme payable
where a Service man or woman dies in service. It will be four
times pensionable salary if the Service person is a member of
the new AFPS. It is approximately 1½ times pensionable salary
for those personnel in the current scheme.
Defined Benefits Scheme
is a pension scheme providing pre-defined benefits, which are
worked out in accordance with a pre-defined formula, usually in
relation to earnings. The AFPS is a defined benefits scheme.
Demographic assumptions
or mortality assumptions are actuarial assumptions
based on how long pensioners are likely to live.
Early Departure Payments
under the new proposals are the replacement arrangements for the
Immediate Pension (IP). The Government's proposals for new taxation
rules for pensions would in the future not allow pensions to be
paid before the age of 55 from tax-approved pension schemes. In
response, an alternative to the IP is being developed which will
allow payment of a lump sum and a stream of income along similar
lines to the IP, but from a new Early Departure Scheme
outside the pension arrangements.
Early Departure Point
is the point at which personnel will become entitled to Early
Departure Payments under the new proposals. This is after 18 years
service or age 40, whichever is the later, for both officers and
other ranks. On reaching this point the member will be able to
leave the Armed Forces in receipt of an Early Departure lump sum
and an income stream until payment of the preserved pension at
age 65.
Guaranteed Income Stream (GIS)
is a benefit intended to compensate the individual for loss of
earnings due to the fact that ability to work has been impaired
or lost through attributable injury or illness. It is calculated
as a lump sum but paid as a steady annual income for life uprated
in line with inflation, comparable to an index-linked annuity.
Immediate Pension (IP)
is a benefit under the current AFPS paid immediately on leaving
the Armed Forces after 16 years' reckonable service as an officer
or after 22 years' reckonable service in the ranks. Under the
new pension scheme, it will be replaced by Early Departure
Payments.
Index Linking is an annual
increase in pension, once in payment, in line with movements in
the Retail Prices Index, to make sure that it retains its purchasing
power. Increases are made in April, using the previous September's
annual headline rate of inflation.
Member is a currently
serving or retired member of the Armed Forces who has joined the
AFPS and is earning/has earned benefits under the scheme.
Non-Attributable Benefits
are ill-health retirement benefits paid where injury, illness
or death is not due to service.
Pensionable Pay is the
total amount of annual basic pay, including X-factor (a percentage
increase to basic pay which reflects the difference between the
conditions of service experienced by members of the Armed Forces
and conditions in civilian life) but not including allowances
or additional pay.
Pension Troughs are lower
levels of pension which occur at times when price increases have
been greater than salary increases, particularly where the Government
fails to increase salaries in line with inflation as a matter
of policy.
Preserved Pension is awarded
to a member leaving the AFPS after a minimum of 2 years' service,
before the normal pension age (55). It is currently payable at
the age of 60, but the Government proposes that in the future
it should be payable from age 65.
Retrospection means making
changes to accrued benefits.
Short-term Pension is
payable under the current pension scheme to the spouse of a scheme
member who has died, normally for between 3 and 6 months. It is
set at the full rate of the member's salary or pension. Under
new Inland Revenue rules, this type of arrangement will not be
allowed in tax-approved pension schemes. There will therefore
be no short-term pension under the new pension scheme.
Superannuation liability
is the share of the cost of pension cover met by the Ministry
of Defence as an employer. The contribution rates are assessed
on essentially the same basis as employers in the private sector
who operate funded pension schemes offering benefits based on
the member's final salary and length of service. The contribution
rates reflect benefits as they are accrued, not when the costs
are actually incurred, and reflect past experience of the scheme.
Veterans Agency is an
agency of the Ministry of Defence which administers the current
War Pension Scheme, and which will administer the new compensation
scheme.
War Pension is a benefit
payable under the existing compensation scheme, the War Pension
Scheme.
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