Do you or your partner hold an Armed Forces Pension Scheme? If you’re getting divorced or separating, there are a few points to consider in order to reach a fair settlement.
When embarking on the divorce process, many people are not aware of the value of their pension schemes. In particular, those clients either holding the benefit of an Armed Forces Pension Scheme or clients who are married to or in a civil partnership with someone who holds a military pension, should take specialist legal advice. This is to ensure the valuation of the pension is calculated accurately and fairly and to ensure that all elements of the pension are considered.
There are three main schemes under the Armed Forces Pension Scheme (AFPS) “umbrella”:
The Armed Forces Pension Scheme (AFPS) 1975
Scheme Dates: 1975 to 5 April 2005.
Normal Retirement Age: age 55 but an Immediate Pension is available after 16 or 22 years depending on rank held. A Deferred Pension can also be paid for those who do not have the requisite years of service for an Immediate Pension from age 60 or 65 depending on when service took place.
Basis upon which Pension Benefits are Calculated: The AFPS 1975 scheme is a defined benefit scheme and the pension is based on the rate of pay at the time of retirement or final pensionable earnings. A lump sum is also paid on retirement of up to 25% of total pension benefits.
Early Departure Payments: None
The Armed Forces Pension Scheme (AFPS) 2005
Scheme Dates: 6 April 2005 to 31 March 2015.
Normal Retirement Age: age 55 (and is also the Immediate Pension point) and a Deferred Pension can also be paid for those who do not have the requisite years of service from age 65
Basis upon which Pension Benefits are Calculated: The AFPS 2005 scheme is a defined benefit scheme and is based on earnings received over the final three years of service. A lump sum is also paid on retirement of up to 25% of total pension benefits.
Early Departure Payments: Yes – available after 18 years service and reaching at least age 40. These payments are paid until the deferred pension is paid at age 65.
The Armed Forces Pension Scheme (AFPS) 2015
Scheme Dates: 1 April 2015 to current.
Normal Retirement Age: age 60 (and is also the Immediate Pension point) and a Deferred Pension can also be paid for those who do not have the requisite years of service from State Pension age.
Basis upon which Pension Benefits are Calculated: The AFPS 2005 is a defined benefits scheme but the pension benefits are based on annual earnings each year. A proportion of the service member’s annual earnings accumulates in the pension pot each year. This scheme does not pay a lump sum on retirement unless the scheme holder commutes some of their pension to create a lump sum. The pension would then be reduced as a lump sum is taken instead.
Early Departure Payments: Yes – available after 20 years service and reaching at least age 40.
Note that Early Departure payments are not classed as pension so if they are payable, it is vital that you take specialist advice to ensure they are accounted for fairly in any divorce settlement.
Pension issues on divorce is a particularly complex area and it is often necessary for your lawyer to involve a pensions specialist called an Actuary to assist in working out how the pension should be shared. If you’re unsure of all the terminology around pensions and divorce, you can read our Divorce and Pensions Jargon Buster here.
For more information please get in touch with our team.