Armed Forces Pension Guides

Making sense of your armed forces pension

Your armed forces pension is one of the most valuable things you earn in service, yet it is also one of the least understood. The rules changed in 2005, again in 2015, and once more in 2022, so most people who have served any length of time now hold benefits in more than one scheme and carry a McCloud remedy choice on top. These guides exist to turn that tangle into something you can actually use, written by people who have read the scheme rules so you do not have to. Each guide goes deep on one topic; this page is the map that shows how they fit together and which one to open first.

A word on what this site is. We are an independent education resource. We are not affiliated with the Ministry of Defence, Veterans UK or JPAC, and nothing here is regulated financial advice. The figures in these guides are estimates to help you understand how the schemes work and to ask sharper questions. For an official forecast you request a quote from Veterans UK, using form 12 if you are still serving or form 14 if you hold a preserved pension. Use our guides and calculators to get the outline of the decision, then confirm the specifics with that official forecast, and for the bigger, irreversible calls take regulated advice as well.

The three schemes in brief

There are three armed forces pension schemes, and the one your service was built in decides almost everything else: how much you get, when you can draw it, and whether you receive an automatic lump sum. Your starting scheme is set mainly by when you first joined the Regular forces, but from 1 April 2022 everyone still serving builds new pension in AFPS 15 whatever scheme they began in. That is why a long career usually ends up as two slices stitched together, an older final-salary slice and a newer career-average slice, each paid under its own rules.

AFPS 75, the original final-salary scheme

AFPS 75 is a final-salary scheme built on the representative pay for your final rank rather than your exact salary, so two people of the same rank and service generally retire on much the same pension. Build-up runs to a maximum of 48.5% of final pensionable pay over a full career, which is 34 years for officers and 37 years for other ranks. It pays an automatic tax-free lump sum of three times your annual pension, and its normal pension age is 55, so serving to 55 means an immediate pension. Leave earlier and the preserved pension is paid from 60 for service before 6 April 2006 and from 65 for service after that. For a complete career it is generally the most generous of the three.

AFPS 05, final salary on a cleaner formula

AFPS 05 is also final-salary, but the maths is simpler to picture. You earn 1/70th of your final pensionable pay for every year served, building up to around 57% of final pay over a long career, again with an automatic tax-free lump sum of three times the annual pension. AFPS 05 shares the AFPS 75 normal pension age of 55, so serving to 55 means an immediate pension. The difference shows up if you leave earlier: a preserved AFPS 05 pension is always paid at 65, later than the 60 that applies to AFPS 75 service before 6 April 2006. To bridge that gap, AFPS 05 carries an Early Departure Payment for qualifying leavers.

AFPS 15, career average for everyone serving now

AFPS 15 is a different animal. It is a career-average scheme, written CARE, which stands for Career Average Revalued Earnings. Each year the scheme banks 1/47th of that year's pensionable pay into a running pot and revalues it so it keeps its value against inflation. There is no automatic lump sum, so if you want tax-free cash you commute up to 25% of your pension at a fixed rate of about 12 pounds for every 1 pound of yearly pension you give up. Its normal pension age is 60, and if you leave before then the deferred pension is paid at your State Pension age, with an Early Departure Payment available from age 40 for those who qualify. The later pension age is the main reason people feel AFPS 15 is less generous, though its 1/47th build-up is strong for a public-service scheme and it rewards every year served rather than just your finishing rank.

Commutation: trading income for a lump sum

Commutation means giving up part of your annual pension in exchange for a larger tax-free lump sum on the day you draw your benefits. It matters most on AFPS 15, which has no automatic lump sum, so commuting is the only way to create tax-free cash on that scheme. The rate is set by a commutation factor: a factor of 12 to 1 means every 1 pound of yearly pension you surrender turns into about 12 pounds of cash. As a broad benchmark a factor above roughly 20 to 1 is generally considered good value, so the fixed AFPS 15 rate of about 12 to 1 sits well below that, which is a strong argument for commuting only what you genuinely need rather than the full 25% out of habit.

The legacy schemes work differently. AFPS 75 and AFPS 05 already pay that automatic lump sum of three times the pension, and on top of it they allow resettlement commutation for extra cash using age-banded factors published by the Government Actuary's Department. The key point on any scheme is that commutation is permanent and irreversible: every pound of lump sum comes straight out of a guaranteed, inflation-linked income you would otherwise have drawn for life.

An illustrative commutation example

Here is an illustrative example; the figures are round numbers chosen to keep the arithmetic clear, not a quote for your pension. Suppose a member on AFPS 15 has a yearly pension of 10,000 pounds and decides to commute the full 25% allowed. Giving up 25% means surrendering 2,500 pounds of yearly income. At the fixed rate of about 12 to 1, that 2,500 pounds is multiplied by 12 to produce a tax-free lump sum of 30,000 pounds, and the pension that remains in payment is 10,000 minus 2,500, which is 7,500 pounds a year. So the trade is a 30,000 pound tax-free sum now in exchange for 2,500 pounds a year less, every year, for the rest of the member's life. On a rough cash basis the lump sum is worth about twelve years of the income you gave up before you even count the inflation rises you also forfeit, for example the 3.8% uprating from April 2026. The longer you live, the more that income would have added up to.

The Early Departure Payment (EDP)

The Early Departure Payment, or EDP, supports people who leave before their normal pension age but with enough qualifying service behind them. It pays a tax-free lump sum on the way out, plus a monthly income that runs until your scheme pension comes into payment at pension age. Think of it as a bridge across the years between leaving and pension age, not a replacement for the pension itself, which is still calculated separately and paid in full on top from pension age onward. The EDP exists on AFPS 05 and AFPS 15 only; AFPS 75 handles early leaving through its own Immediate Pension and resettlement arrangements instead.

Both versions set a service test and an age test, and you have to clear both. On AFPS 05 you broadly need at least 18 years' service and to be at least age 40. On AFPS 15 the bar is broadly 20 years and again at least age 40, often called the 20/40 point. On AFPS 15 the EDP lump sum is 2.25 times your preserved pension, with the monthly income a percentage of that same pension. The lump sum is tax-free, but the monthly EDP income is taxable as earned income, so if you start a civilian job the two stack up and are taxed together. If you just miss the EDP test you usually keep a preserved pension instead, held for you and payable later at your scheme's preserved pension age, which is 65 on AFPS 05 and your State Pension age on AFPS 15, with no bridging income in the gap years, which is exactly why being a few months short can change the outcome completely.

The McCloud remedy

When AFPS 15 came in during 2015, the government moved younger members across but let those closer to retirement stay in their legacy scheme for a while longer. The courts ruled in the McCloud and Sargeant cases that protecting people by age in this way was unlawful age discrimination, and the fix is what everyone now calls the McCloud remedy. The remedy period runs from 1 April 2015 to 31 March 2022. If you were serving and affected during any of that window, you get a choice for those years: take the benefits you would have had under your legacy scheme, AFPS 75 or 05, or take AFPS 15 benefits instead.

You do not have to decide blind. Veterans UK provides a Remediable Service Statement that sets out your figures calculated both ways so you can compare like for like. For most people the choice is deferred, which means you make it at the point you actually draw your pension, when your final pay and circumstances are known and the comparison is sharper; those already retired or very close to it get an earlier choice. There is no single right answer. Late promotion tends to favour the final-salary legacy schemes, because a high finishing pay lifts all of your remedy-period service, while a flatter pay history can make the career-average basis competitive, and your leaving age and tax position both come into it. The choice is a one-off and irreversible once made, so for anything close it is worth taking regulated advice and relying on the figures in your official statement.

How the guides fit together

The guides above are built as a small map rather than a pile of articles. At the centre sit the schemes, because almost every other decision depends on which scheme your service was built in. From there the guides branch into the two things people most often need to decide, how to take their benefits and how to handle the 2015 to 2022 window.

• Start with the schemes.The schemes guide and the "which scheme am I in" guide work out your starting scheme from your join date and explain how the 2022 move split your service. Read these first if you are not certain where your pension sits.
• Then the benefits decisions. The commutation guides cover the trade of income for cash and whether it is worth it, while the EDP guide covers leaving early. These matter at the point you decide how and when to draw your pension.
• Then the remedy. The McCloud remedy guide covers the 2015 to 2022 choice. It builds on the schemes guide, because the choice is really a comparison between your legacy scheme and AFPS 15 for those seven years.

Read in that order, the guides take you from "which scheme am I in" to "what will I get and when" to "what do I choose for the remedy years", which is the natural sequence of questions almost everyone works through.

Who should read which guide

You do not need to read everything. Pick by where you are in your service and what decision is in front of you.

• Newly serving or early in your career: start with the schemes guide so you understand you are now building AFPS 15 and what 1/47th a year actually means over time.
• Long server thinking about leaving around age 40: the EDP guide is for you, because the 18/40 and 20/40 thresholds and the bridging income often matter more than the headline build-up rate.
• Approaching the point of drawing your pension: the commutation guides help you weigh a bigger tax-free lump sum against the guaranteed, index-linked income you give up for life.
• Served any part of 2015 to 2022: the McCloud remedy guide explains the choice, how to read your Remediable Service Statement, and when you actually have to decide.
• Not sure where your pension sits at all:the "which scheme am I in" guide untangles join dates, breaks in service, rejoining and transfers in, which are the cases where the simple rule bends.

Before you act on any figure

Whatever you read here, the order to follow is the same. Fix your dates first: when you joined, any break in service, and whether you have ever transferred pension in, because those three things explain almost every case where the simple rules do not hold. Next, pull your most recent annual benefit statement and read off the scheme or schemes it lists. Then, for any real decision, request an official forecast from Veterans UK using form 12 if you are serving or form 14 if you hold a preserved pension, and wait for those figures before you commit. An estimate is fine for planning; it is not the number to resign on, and a Remediable Service Statement, not any calculator, is the binding document for your remedy-year figures.

Frequently asked questions

Sources:gov.uk, Armed forces pensions & Understanding your armed forces pension · Discover My Benefits (MOD) · Forces Pension Society · MoneyHelper · GAD commutation factors. These guides give estimates only and are not regulated financial advice.