The Armed Forces

There are currently two pension schemes running for people in the Armed Forces. The first was set up in 1975, but was replaced in 2005 by the second, modified scheme. The new scheme is a defined benefit scheme (see Occupational defined benefit schemes), with a pension based on your final salary and a tax-free lump sum on retirement. There are different rules to calculate the benefits you are entitled to if you retire early on the grounds of ill health, or die before pensionable age. Specialised pension schemes are generally more generous than other occupational pension schemes when it comes to providing for their members and their members' families in difficult circumstances.

The current Armed Forces pension scheme calculates a member's pension as:

annual pension =      number of years   x   accrual rate   x   final salary
 from scheme            in scheme 1/70 
                              (to maximum of 40)

Your final salary is calculated as your highest annual wage during the final three years of your Armed Forces service. For example, you retire after thirty-five years of service. Your salary over the last three years was £40,000, £42,000 and £44,000. Your annual pension will be:

                 35 x 1/70 x £44,000 = £22,000 annual pension

You can buy additional years of service by making higher contributions to the pension scheme, and you are free to contribute to further personal pensions if you wish. The Service Personnel and Veterans Agency operates a helpline on 0800 085 3600 if you have any enquiries.