Armed Forces Pension Scheme
An overview of the Armed Forces Pension Scheme, including government changes to pensions and the remedy to the discrimination caused by these changes.
The Armed Forces Pension Scheme (AFPS) is a defined benefit occupational pension open to most members of the armed forces. A defined benefit scheme pays a promised income in retirement. Unlike other public service pension schemes, members do not make contributions to their pensions, but the value of pension benefits is taken into account in setting pay.
The AFPS is ‘unfunded’ and operates on a pay-as-you-go basis, meaning that there is no fund of assets which is invested and from which pension benefits are paid. The Ministry of Defence, as the employer, is responsible for making employer contributions, which are then used to pay benefits to current pensioner members.
The AFPS employer contributions are set as a percentage of pensionable pay. From April 2024, the employer contribution rate is 73.5% of pensionable pay.
The government reformed public service pensions in 2014 and 2015 following a review into their long-term affordability.
The current scheme, Armed Forces Pension Scheme 2015 (AFPS 15), was introduced from 1 April 2015.
The schemes
There are different armed forces pension schemes.
The Armed Forces Pension Scheme 1975 (AFPS 75) was open to entrants who joined the armed forces before 5 April 2005.
The Armed Forces Pension Scheme 2005 (AFPS 05) was open for new entrants to the regular armed forces on 6 April 2005 until the introduction of AFPS 15.
In April 2005, the government also introduced the Reserve Forces Pension Scheme (RFPS) for those who started or restarted full-time reserve service on or after 6 April 2005. The AFPS 75, AFPS 05 and RFPS offer members final salary pension benefits, meaning members will receive a pension that is based on their final pensionable earnings, and length of service.
The current scheme, Armed Forces Pension Scheme 2015 (AFPS 15), was introduced on 1 April 2015. The scheme provides pension benefits based on career average earnings rather than final salary. This means that pension benefits are calculated according to average earnings over a member’s career. All serving members on that date transferred to the 2015 scheme unless they qualified for ‘transitional protections’.
McCloud remedy
The government reformed public service pensions in 2014 and 2015. Like other public service schemes, serving members of the armed forces were transferred to a reformed scheme. The government decided that members closest to retirement would not be affected by the reforms. In many cases, these members could stay in the existing ‘legacy’ schemes rather than moving to the newer ‘reformed’ schemes.
In 2018, the government was found to have discriminated against younger members of public service pension schemes. The judgment, known as McCloud, resulted in the government making changes to public service pension schemes to remedy discrimination which had taken place.
More information on the McCloud remedy is available in the Library briefing ‘Public service pensions – response to McCloud’.
Further information
See the gov.uk webpage and following Library briefings for further information: