Armed Forces Pension Planning: A Guide to AFPS 15 and Beyond

Members of the UK armed forces receive pension provision through one of the most generous occupational schemes in the public sector. However, the unique nature of military service — including early retirement ages, potential deployment overseas, complex service records, and frequent career transitions — creates planning challenges that require specialist understanding. This guide covers the key features of the current scheme, how military pensions interact with private saving, and the options available to those who leave service or retire abroad.

Overview of AFPS 15

The Armed Forces Pension Scheme 2015 (AFPS 15) replaced the previous AFPS 05 and AFPS 75 schemes for new entrants and, from 1 April 2022 (following the McCloud remedy), for most members in service. AFPS 15 is a Career Average Revalued Earnings (CARE) scheme, meaning pension is based on career-average salary rather than final salary.

Key features of AFPS 15:

Accrual rate. Each year of qualifying service, a member accrues 1/47th of their pensionable pay for that year. These annual accruals are revalued each year (currently in line with CPI +1.25%) until retirement. This is generally slightly less generous than the 1/45th rate in AFPS 05 but better than many public sector comparators.

Normal pension age. The Normal Pension Age (NPA) for AFPS 15 is 60. Members who leave before NPA have their preserved pension revalued until NPA.

State Pension integration. AFPS 15 is "contracted in" to the state pension — members accrue state pension entitlement alongside their armed forces pension.

Pension Taxation. Like all registered pension schemes, contributions attract tax relief, and the pension itself is subject to income tax on drawdown. Lump sum commutation is available (subject to limits — see below). The Lifetime Allowance was abolished from April 2024, removing what was previously a major planning consideration for long-serving senior officers.

Early Departure Payments

Officers and other ranks who leave the armed forces before the Normal Pension Age but after serving a qualifying period receive Early Departure Payments (EDPs) rather than immediate pension. The qualifying criteria are:

• Having reached age 40, and
• Having completed at least 20 years of qualifying service.

Where both conditions are met, the EDP provides an immediate tax-free lump sum (of approximately 3× the annual preserved pension at the date of departure) plus an immediately payable income stream equivalent to approximately 34–50% of pension (depending on rank and service). The preserved pension itself continues to accrue until NPA, when it becomes payable in full.

For those leaving before the EDP qualifying conditions are met, a preserved pension is held until NPA. No early payment is available in that case.

The EDP represents a significant financial resource for service leavers in their early 40s and should be factored into comprehensive financial planning. Tax advice on the most efficient use of EDP proceeds is important, particularly in respect of ISA contributions, SIPP top-ups, and property investment.

Commutation: Taking a Lump Sum

AFPS 15 members can commute part of their pension for a lump sum at retirement or NPA. The commutation rate (how much pension income must be forgone per pound of lump sum) is set by the scheme actuaries and varies based on age at retirement.

The first 25% of a pension's capital value can be commuted free of income tax as a pension commencement lump sum (PCLS), though the mechanics are different from a personal pension because the AFPS is a defined benefit scheme. Members should obtain a Personal Pension Statement and take advice from the Scheme Administrator (Veterans UK) and an independent financial adviser before making commutation decisions, as the financial trade-off between income and lump sum is significant and irreversible.

The commutation decision is effectively an exchange of guaranteed index-linked income for immediate capital. For members in good health who expect a long retirement, taking less commutation (retaining more income) often makes long-term financial sense. For members with substantial other savings or specific capital requirements, greater commutation may be appropriate.

Preserved Pension

Members who leave the armed forces after completing two years of qualifying service but who have not reached NPA or met EDP criteria receive a preserved pension. This pension:

• Is held until age 60 (NPA for AFPS 15 members).
• Is revalued each year in line with CPI (subject to any applicable cap).
• Is payable as a pension for life, with a spouse/civil partner's pension in the event of the member's death.

Members should ensure they notify Veterans UK of any address changes to ensure pension payment when NPA is reached. Preserved pension forecasts can be obtained from Veterans UK (part of the MOD).

The Forces Pension Society

The Forces Pension Society is an independent voluntary organisation that provides information and advocacy for serving and retired armed forces personnel on pension matters. Membership provides access to guidance notes, specialist advisers, and representation in disputes with the MOD or Veterans UK. For complex situations — disputed service records, divorce and pension sharing orders, McCloud remedy questions — the Forces Pension Society is a valuable first resource.

Interaction with Private Savings: SIPPs and Other Pensions

AFPS 15 membership does not prevent individuals from contributing to a personal pension or SIPP alongside their armed forces pension. This can be valuable for:

• Bridging the gap between EDP age and NPA, particularly for those with a preserved pension that is not accessible until 60.
• Tax planning — pension contributions attract income tax relief at the marginal rate, making contributions during higher-earning years particularly valuable.
• ISA equivalents — for those who want accessible savings alongside an illiquid occupational pension.

The annual allowance for pension contributions applies in the normal way to members of AFPS 15. For defined benefit schemes, the "pension input amount" is calculated as 16× the increase in the annual pension value (after revaluation) during the year, plus any lump sum increase. For active members receiving significant pay rises, the pension input amount can be large and may use a substantial portion of the annual allowance. Carry forward of unused annual allowance from the previous three years can be used to accommodate larger contributions.

Tapered annual allowance applies to those with adjusted income above £260,000 (as at 2026), including senior military officers. Military pension input amounts should be modelled against available allowances before making significant SIPP contributions.

Death Benefits Under AFPS 15

The AFPS 15 death benefit provision is generous:

• Death in service: A tax-free lump sum of 4× final pensionable earnings, plus an adult dependant's pension (typically 62.5% of the member's prospective pension). Children's pensions are also payable.
• Death in retirement: A spouse/civil partner's pension of 62.5% of the member's pension. Dependant's pensions may also apply.
• Ill-health retirement: Enhanced pensions and lump sums apply where service-attributable medical discharge occurs.

Death benefit nominations should be reviewed regularly and kept up to date with Veterans UK. Lump sum death benefits from a registered pension scheme are not subject to income tax on the recipient (though they may be within the member's estate for IHT purposes if paid to the estate — nominations to named individuals bypass the estate).

QROPS for Service Personnel Living Abroad

A Qualifying Recognised Overseas Pension Scheme (QROPS) allows UK pension rights to be transferred to an approved overseas pension scheme for individuals permanently resident outside the UK. This is relevant for former armed forces personnel who retire or are based abroad.

Key points:

• AFPS 15 is an unfunded public sector scheme and is specifically excluded from transfer to a QROPS by statute. Members of AFPS 15 cannot transfer their defined benefit military pension to any QROPS or personal pension. This protection was introduced to preserve the guaranteed, index-linked pension that public service workers are entitled to.
• AVC funds (Additional Voluntary Contributions, where held) may be transferable in some circumstances, as they are held in a separate defined contribution pot.
• For those who also hold private pension arrangements (SIPPs, personal pensions from previous employment), QROPS transfers may be possible if they are permanently non-UK resident and the destination scheme qualifies.

The rules around QROPS are complex, and an unauthorised transfer from a registered scheme results in a significant tax charge. The prohibition on transferring AFPS rights is firm — no reputable adviser will suggest otherwise.

Planning for Service Leavers

The transition from military service to civilian life involves financial planning considerations beyond the pension:

• EDP lump sum. This is a significant capital sum that requires careful investment planning.
• State pension record. Service in the armed forces counts as qualifying years for state pension. Check your National Insurance record regularly via HMRC Personal Tax Account.
• Insurance. Forces-specific life assurance and income protection schemes (e.g. AFPS Survivors' Benefits) may need supplementing in civilian life.
• Resettlement grant. For long-term servicepersons, a terminal grant (taxable) may be payable. Tax planning around receipt date (e.g. across a tax year boundary) can be relevant.

How Global Investments Can Help

Global Investments advises current and former armed forces personnel on integrating military pension entitlements into a comprehensive financial plan. Our advisers understand the specific features of AFPS 15, EDP planning, SIPP interaction, and the considerations for those based overseas. We work alongside specialist military pension advisers and solicitors where complex cases require it. Contact us for a confidential initial consultation.

This guide is for information purposes only and does not constitute financial, pension, or legal advice. Armed forces pension rules are complex and depend on individual service records. Readers should contact Veterans UK for scheme-specific information and obtain independent financial advice before making pension decisions. Rules and figures are as at June 2026 and are subject to change.