Armed Forces Pensions set to rise significantly for the second year running

Category: News Publish date: 20/02/2024

The Forces Pension Society welcomes the Government’s decision to increase Armed Forces pensions in line with the Consumer Prices Index for another year. It means this years’ increase will be 6.7% and follows last years’ uplift of 10.1%.

So, what does this mean for you? Let’s look at it in more detail and explain why it matters!

The CPI headline rate for the September of the previous year is the rate that determines the official CPI rate which comes into force on the first Monday after the beginning of the new tax year - so, the date for the 2024 increase will be 8 April 2024.

First, AFPS 05 pensions and Early Departure Payments are calculated using the best consecutive 365 days’ pay in the last three years, with the two earliest years increased by CPI. This helps protect the member when inflation is high and pay awards are low.

Next, any AFPS 15 Added Pension already purchased increases by CPI each year.

Finally, CPI increases build up from the time you leave the Armed Forces, and this applies whether your pension is paid immediately or preserved/deferred until you are old enough to draw it. These CPI increases are referred to as Pension Increases (PIs). The first PI is paid on a sliding scale depending upon when in the year you leave. The earlier you leave in the period 1 April – 31 March the more of the increase you will receive in the following April. The full increase is paid in subsequent years. Remember, if CPI is high in the year you retire, the date you leave can impact on the size of your pension.

If you are leaving with an AFPS 75 Immediate Pension (IP) and are not yet aged 55, the PIs are stored for you and become payable at age 55. When the PI is applied (and it happens automatically), it will be based upon your original pension award, not any reduced amount you might be receiving due to Resettlement Commutation.

If you are leaving with a preserved/deferred pension, all the PIs that have occurred since your discharge will be added prior to the pension coming into payment. Once your pension is in payment, PIs will be applied each April thereafter.

PIs are applied early in only three circumstances:

1. If the pension is an invaliding pension.
2. If you are unable to work full-time due to a mental or physical disability which is deemed will continue until your preserved/deferred pension age you can claim your preserved/deferred pension (plus PIs) early. If your IP is in payment, you can claim your PIs early in the same circumstances.
3. If you die, PIs are applied to your family’s benefits, irrespective of your age or theirs.

You can learn more about us at forcespensionsociety.org.