How much is an army pension after 20 years?

Twenty years, three schemes, three different answers

Twenty years is the most scheme-dependent point in the whole set. At six or ten years everyone is in the same position, a preserved pension and nothing on the day. At twenty years the same length of service produces four different outcomes depending on which scheme holds it and, on AFPS 75, whether you were commissioned.

On AFPS 05 with a £45,000 final salary, twenty years builds a pension of about £12,857 a year, 20/70ths of final pensionable earnings, with an automatic tax-free lump sum of around £38,571. That is the figure the early-payment routes below are all calculated from, because both EDPs are worked out as a percentage of the deferred pension your service has earned.

AFPS 15: 20 years is the 20/40 point

EDP 15 pays if you leave at age 40 or over, before 60, with at least 20 years of Regular service. The scheme calls it the 20/40 point because both the 20-year and the 40-year marks have to be passed, and twenty years is the exact service half of it. If you are 40 or over on the day you go, you qualify.

What it pays is a tax-free lump sum of 2.25 times your annual deferred pension, plus a monthly income of 34% of that deferred pension. The income runs until State Pension age, at which point it stops and the deferred pension itself comes into payment. The income is uprated for inflation while it runs, but the rate itself does not step up at any point.

For an illustrative figure, twenty years of AFPS 15 on £45,000 of career average earnings builds a deferred pension of about £19,149 a year. The EDP lump sum would be around £43,085 and the income about £6,511 a year. One trap to know about: a break in service of more than five years means you have to serve another 20 years or more on returning to qualify for an EDP at all.

AFPS 05: you passed the EDP point at 18

On AFPS 05 the threshold is lower and you crossed it two years ago. EDP 05 pays if you leave at 40 or over and before 55, with at least 18 years of Regular service, the 18/40 point. The 55 cut-off is there because at 55 you reach AFPS 05's Normal Pension Age and leave with an immediate pension instead.

EDP 05 is more generous than EDP 15 on every headline. The lump sum is three times the annual deferred pension rather than 2.25 times. The income starts at 50% of the deferred pension rather than 34%, with an extra 1.6667% of it for each year served beyond the 18/40 point. And it has a step the newer scheme does not: from age 55 the income rises to 75% of the deferred pension, running until 65 when the deferred pension starts.

On the £45,000 example, twenty years gives a deferred pension of about £12,857, so the EDP 05 lump sum is around £38,571 and the income about £6,429 a year, rising to roughly £9,643 from 55. Our EDP 05 versus EDP 15 guide sets the two side by side, which matters if the McCloud remedy gives you a choice over part of your service.

AFPS 75: officers passed 16, other ranks have two years to run

AFPS 75 has no EDP. Its early-payment route is the Immediate Pension, which is paid on leaving Regular service before 55 having reached the qualifying point. That point is 16 years of qualifying service from age 21 for officers, and 22 years from age 18 for other ranks.

So at twenty years an officer is four years past their Immediate Pension point and an other rank is two years short. Twenty years for that other rank means a deferred pension, plus a Resettlement Grant if the conditions are met, and nothing paid on the day beyond the grant. Twenty years for the officer means an annual pension plus a lump sum of three times it, paid on discharge.

This is the largest two-year swing anywhere in the schemes. Crossing 22 years turns a deferred pension into money paid now, brings the automatic three-times lump sum with it, and opens up resettlement commutation as an option. For reference, the accrued pension at the Immediate Pension point is 31.83% of representative pay for an other rank at 22 years and 28.5% for an officer at 16 years. Note that AFPS 75 works from the representative rate of pay for your rank for most ranks, not the figure on your payslip.

The age test that catches 20-year leavers out

Both EDPs have an age test, and it is unforgiving. Leave with twenty years at age 38 and there is no EDP under either scheme, no matter how much service you have. Someone who joined at 17 and leaves at 37 with twenty years gets a preserved pension and, subject to the conditions, a Resettlement Grant, and not a penny of Early Departure Payment. The service half of the test is met and the age half is not, and there is no partial award.

The same logic runs through the uplift for extra service, which is the part almost everyone gets wrong. The years that earn an uplift are the smaller of (your age minus 40) and (your service minus 20) on EDP 15, and the smaller of (your age minus 40) and (your service minus 18) on EDP 05. Extra service earns nothing before you are 40, and extra age earns nothing below the service floor.

Work that through at twenty years. Leaving at exactly 40 with 20 years on AFPS 15 gives the flat 34%, with no uplift available. Leaving at exactly 40 with 20 years on AFPS 05 gives the flat 50%, even though you are two years past the 18-year mark, because your age contributes nothing yet. By contrast, leaving at 44 with 24 years on AFPS 15 gives 34 plus 4 times 0.85, which is 37.4%, and at 44 with 22 years on AFPS 05 it is 50 plus 4 times 1.6667, which is about 56.67%.

What serving past 20 years changes

For an AFPS 75 other rank, serving to 22 is the single biggest step available anywhere in these schemes, for the reasons above. If you are within touching distance of it, the leaving date is worth more than almost any other decision on the way out.

On AFPS 05 and AFPS 15 the improvement is steadier but it runs on two clocks at once. Each extra year of service adds a seventieth or a forty-seventh to the underlying pension and can add to the EDP rate, and each year of age past 40 can add to the EDP rate as well, up to the limit set by whichever of the two is smaller. Serving past 40 is therefore worth more per year than serving before it.

Before you set a date, run your own position on the EDP calculator and read the Early Departure Payment guide for how the income and lump sum interact with the deferred pension that follows. If your service spans 1 April 2015 to 31 March 2022 you may also have a McCloud choice that changes which EDP rules apply to part of it, so check that before treating any single figure as final.

Run 20 years on your own pay

The worked figures above use a representative salary, so they show the shape of the answer rather than your answer. The army pension calculator takes your own pay, rank and scheme and applies the same rules, and the military pension calculator and MOD pension calculator run the same engine if that wording matches your record better.

Serving beyond 20 years changes the position considerably, because reaching the Immediate Pension or Early Departure Payment point moves you from a preserved pension to money paid now. If you are close to leaving, check where you sit on the Early Departure Payment calculator before you set a date.