The Armed Forces Pension Scheme Order 2005

Made: 8th March 2005

Laid before Parliament: 14th March 2005

Coming into force: 6th April 2005

The Secretary of State for Defence, in exercise of the powers conferred upon him by sections 1(1) and (3), 3 and 10(2), (3) and (4) of the Armed Forces (Pensions and Compensation) Act 2004[^f00001] hereby makes the following Order:

Preliminary

Citation and commencement and interpretation

1

This Order may be cited as the Armed Forces Pension Scheme Order 2005 and comes into force on 6th April 2005.

Establishment of the Armed Forces Pension Scheme 2005

2

• (1) The Scheme set out in Schedule 1 to this Order has effect and is to be known as “the Armed Forces Pension Scheme 2005”.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amendments of the Armed Forces Pension Scheme 2005

3

• (1) For the purposes of section 3(2) of the Armed Forces (Pensions and Compensation) Act 2004, so far as it applies to the Armed Forces Pension Scheme 2005, the consent requirements are as follows.

• (2) The Secretary of State may not make a modification of the Scheme which would or might adversely affect any entitlement, accrued rights or pension credit rights of any member acquired before the power to modify the Scheme is exercised unless—

• (a) he has taken the steps specified in paragraphs (3) to (5) and obtained the written consent of the member, or

• (b) paragraph (6) applies.

• (3) The Secretary of State must give written notice to the member that it is proposed to modify the Scheme in a manner which will or might adversely affect an entitlement, accrued rights or pension credit rights of the member that have been acquired before the modification is to take effect.

• (4) The notice must—

• (a) set out the modifications proposed to be made which would or might adversely affect any such entitlement or rights, and

• (b) contain an explanation of their effects.

• (5) The notice must contain a statement that the modifications will not affect any such entitlement or rights unless—

• (a) the member has consented in writing to the modifications, or

• (b) paragraph (6) applies.

• (6) This paragraph applies if—

• (a) the Secretary of State has sent two copies of the notice to the member’s last known address, the second being sent at least 2 months after the first, and

• (b) no response has been received from the member to either of the notices before the end of the period of one month beginning with the date on which the second was sent.

• (7) In this regulation “accrued rights”, “entitlement”, “member” and “pension credit rights” have the same meaning as in Part 1 of the Pensions Act 1995[^f00004] (see section 124 of that Act).

Amendments of other regulations

4

• (1) Regulation 1(2) of the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc.) Regulations 1997[^f00005] is amended as follows.

• (2) At the end of the definition of “Armed Forces Pension Scheme” insert the words “or section 1(1) of the Armed Forces (Pensions and Compensation) Act 2004”.

SCHEDULE 1 — ARRANGEMENT OF RULES

PART A — INTERPRETATION ETC.

A.1

Interpretation: general

A.2

Meaning of “pensionable earnings”

A.3

Meaning of “assumed pay”

A.4

Meaning of “final pensionable earnings”

A.5

Adjustments for inflation in determining final pensionable earnings

A.6

Active membership period

A.7

Qualifying service

A.8

Reckonable service

A.9

Calculation of periods of membership or service etc.

A.10

Disregard of short breaks in service

PART B — MEMBERSHIP

B.1

Eligibility: general

B.2

Persons with other pension arrangements

B.3

Joining the Scheme on starting service

B.4

Joining the Scheme after service begins

B.5

Leaving the Scheme

PART C — CONTRIBUTIONS

Buying Added Years

C.1

Member’s option to pay contributions to increase service

C.2

Cancellation of options

C.3

Effect of making contributions

C.4

Absence from work

C.5

Restriction on pension debit members making contributions

C.6

Purchase of added years for members seconded to NATO or the UN etc.

Repayment of Contributions

C.7

Repayment of contributions

PART D — RETIREMENT BENEFITS

Entitlement To Benefits

D.1

Retirement after reaching pension age

D.2

Retirement before reaching pension age

D.3

Pension credit members' pensions

D.4

Early payment of pensions with actuarial reduction

D.5

Early payment of benefits: active members with permanent serious ill-health

D.6

Early payment of benefits: active members with significant impairment of capacity for gainful employment

D.7

Early payment of benefits: deferred members with permanent serious ill-health

D.8

Member’s requests for review of ill-health awards

D.9

Secretary of State’s power to review ill-health awards

Options to Change Benefits

D.10

Option to exchange lump sum for pension

D.11

Option for members in serious ill-health to exchange whole pension for lump sum

Pension Debit Members and Pension Credit Members

D.12

Reduction in pension debit member’s benefits

D.13

Pension credit member’s rights

Allocation

D.14

Election to allocate pension

D.15

Procedure for election under rule D.14

D.16

Effect of allocation

Contracting-out Obligations (GMPs etc.)

D.17

Guaranteed minimum pensions etc.

PART E — DEATH BENEFITS

Pensions for Adult Dependants

E.1

Surviving spouses' and civil partners' pensions

E.2

Other adult dependants' pensions

E.3

Amount of pensions under rules E.1 and E.2: active members

E.4

Amount of pensions under rules E.1 and E.2: deferred members

E.5

Amount of pensions under rules E.1 and E.2: pensioner members

E.6

Reduction in pensions under rules E.1 and E.2 in cases of wide age disparity

E.7

Adult dependants entitled to two or more pensions under this Part

Pensions for Eligible Children

E.8

Surviving children’s pensions

E.9

Meaning of “eligible child”

E.10

Amount of children’s pension under rule E.8: active members

E.11

Amount of children’s pension under rule E.8: deferred members

E.12

Amount of children’s pension under rule E.8: pensioner members

E.13

Children born after the member’s death

E.14

Children entitled to three or more pensions

Lump Sum Death Benefits

E.15

Death of a member: lump sum benefit

E.16

Amount of lump sum benefit under rule E.15: active members

E.17

Amount of lump sum benefit under rule E.15: deferred members

E.18

Amount of lump sum benefit under rule E.15: pensioner members

E.19

Amount of lump sum benefit under rule E.15: pension credit members

E.20

Members affected by court orders to former spouses and civil partners on death

E.21

Nominations for lump sum death benefits

General Provisions

E.22

Pension debit members

E.23

Dependants' pensions: suspension and recovery

E.24

Recovery of lump sum payments made to nominee

E.25

Provisional awards of children’s pensions: later adjustments

E.26

Payments under this Part

E.27

Dual capacity membership

E.28

Guaranteed minimum pensions for surviving spouses

PART F — TRANSFERS

Transfers Out

F.1

Right to transfer value payment

F.2

Applications for statements of entitlement

F.3

Applications for transfer value payments

F.4

Ways in which transfer value payments may be applied

F.5

Calculating amounts of transfer value payments

F.6

Effect of transfers-out

Transfers In

F.7

Right to apply for acceptance of transfer value payment from another scheme

F.8

Procedure for applications under rule F.7

F.9

Acceptance of transfer value payments

F.10

Calculation of transferred-in reckonable service

Miscellaneous Provisions

F.11

Public sector transfer arrangements

PART G — RE-EMPLOYMENT

Preliminary

G.1

Application of Part G

Treatment of Separate Periods of Service: Options to Aggregate

G.2

General rule: periods of service treated separately

G.3

Option to aggregate earlier membership: previous members of the Scheme

G.4

Option to aggregate earlier membership: previous members of the AFPS 1975

G.5

Procedure for exercising options under rules G.3 and G.4

G.6

Application of rule G.3 to members who opted to leave Scheme

G.7

Re-employment after ill-health awards

PART H — ABATEMENT

H.1

Application of Part H

H.2

Abatement of pensions on re-employment: general rules

H.3

Abatement of pensions: effect of changes after re-employment

H.4

Special rule about annual rate of pay in old service in cases of entitlement to two or more pensions

H.5

Adjustment of basic pay in old service

H.6

General disregard of effect of abatement

PART J — MISCELLANEOUS AND SUPPLEMENTARY PROVISIONS

Claims for and Payment of Benefits

J.1

Claims for and payment of benefits

J.2

False statements etc. about ill-health

J.3

Non-assignability

Pension Credit Members with Two or more Pension Credits

J.4

Pension credit members with two or more entitlements

Forfeiture

J.5

Forfeiture of benefits

J.6

Events enabling forfeiture

J.7

Procedure, references etc.

Commutation of Small Pensions

J.8

Commutation of small pensions

Determination of Questions

J.9

Determination of questions

Information, Evidence, Suspension etc.

J.10

Information and evidence

PART K — AFPS 1975 TRANSFEREES

Preliminary

K.1

Application of Part K: meaning of “AFPS 1975 transferee”

K.2

Options for AFPS 1975 members to join the Scheme under Part K

Transfer of Service from the AFPS 1975

K.3

Service credited from the AFPS 1975

K.4

Treatment of added years: contributions paid before 6th April 2006

K.5

Treatment of preserved awards

K.6

Transfers in: transitional provision

K.7

Pension debit members

K.8

Disapplication of rule E.6

PART A — INTERPRETATION ETC.

Interpretation: general

A.1

• (1) This Part applies for the interpretation of the Scheme.

• (2) The rules of the Scheme are to be construed without reference to any other scheme applicable to the armed forces (except where they refer to the application of another such scheme).

• (3) Without prejudice to section 23 of the Interpretation Act 1978[^f00006], that Act applies for the interpretation of the rules of the Scheme as it applies to an Act of Parliament.

• (4) In the rules of the Scheme, unless the context otherwise requires, the following expressions have the following meanings—

• “active member” has the meaning given in section 124(1) of the Pensions Act 1995 and, except where the context otherwise requires, refers to membership of the Scheme, (but see paragraphs (5) and (6));

• “active membership period” is to be read in accordance with rule A.6;

• “the AFPS 1975” means the occupational pension scheme arrangements, other than the Scheme, that are open to members of the armed forces and set out in— Orders in Council made under section 3 of the Naval and Marine Pay and Pensions Act 1865[^f00007], the Army Pensions Warrant 1977[^f00008], and Orders and regulations made under section 2 of the Air Force (Constitution) Act 1917[^f00009],

• or any instrument amending or replacing any of those instruments;

• “AFPS 1975 transferee” has the meaning given in rule K.1(2);

• “assumed pay” has the meaning given by rule A.3(1);

• “contributions equivalent premium” has the same meaning as in the Pension Schemes Act 1993 (see section 55(2)[^f00010]);

• “deferred member” has the meaning given in section 124(1) of the Pensions Act 1995 and, except where the context requires otherwise, refers to membership of the Scheme, (but see paragraph (5));

• “eligible child” has the meaning given in rule E.9;

• “employment” includes an office or appointment, and related expressions are to be read accordingly;

• “final pensionable earnings” has the meaning given in rule A.4;

• “the guarantee date” has the meaning given in rule F.2(2);

• “the guaranteed cash equivalent transfer value payment” has the meaning given in rule F.3(2);

• “guaranteed minimum” means the guaranteed minimum as defined in sections 14 and 17 of the Pension Schemes Act 1993[^f00011] (minimum pensions for earners, widows and widowers)— as increased in accordance with the requirements of section 109 of that Act[^f00012] (annual increase of minimum pensions), and in a case where a reduction has been made under section 15A of that Act[^f00013] (reduction of guaranteed minimum in consequence of pension debit), as reduced in accordance with that section;

• “member”, in relation to the Scheme, means an active member, a deferred member, a pensioner member or a pension credit member;

• “occupational pension scheme” has the meaning given in section 1 of the Pension Schemes Act 1993;

• “ordinary adoption leave” means leave which, in the opinion of the Secretary of State, corresponds to ordinary adoption leave within the meaning of section 75A of the Employment Rights Act 1996[^f00014];

• “ordinary maternity leave” means leave which, in the opinion of the Secretary of State, corresponds— in relation to any period before 22nd August 1996, to leave under section 33 of the Employment Protection (Consolidation) Act 1978[^f00015], and in relation to any period after 21st August 1996, to leave under section 71 of the Employment Rights Act 1996;

• “paternity leave” means leave which, in the opinion of the Secretary of State, corresponds to paternity leave within the meaning of regulation 4 or 8 of the Paternity and Adoption Leave Regulations 2002[^f00016];

• “pay period”, in relation to a person, means a period by reference to which the person’s earnings in the service by virtue of which he is eligible for membership of the Scheme are payable;

• “pensionable earnings” has the meaning given in rule A.2;

• “pension age” means the age of 55;

• “pension benefit age” means the age of 65;

• “pension credit” has the meaning given in section 124(1) of the Pensions Act 1995[^f00017];

• “pension credit member” has the meaning given in section 124(1) of the Pensions Act 1995[^f00018];

• “pension credit rights” has the meaning given in section 124(1) of the Pensions Act 1995[^f00019];

• “pension debit” means a debit under section 29(1)(a) of the Welfare Reform and Pensions Act 1999[^f00020];

• “pension debit member” means a member of the Scheme whose benefits or future benefits under the Scheme have been reduced under section 31 of the Welfare Reform and Pensions Act 1999 (reduction under pension sharing order following divorce or nullity of marriage), whether before or after he became a member of the Scheme;

• “pensioner member” has the meaning given in section 124(1) of the Pensions Act 1995 and, except where the context otherwise requires, refers to membership of the Scheme (but see paragraphs (6) and (7));

• “pension sharing order” means any provision or order specified in section 28 of the Welfare Reform and Pensions Act 1999;

• “personal pension scheme” means a personal pension scheme within the meaning of section 1 of the Pension Schemes Act 1993 which has been approved under Chapter 4 of Part 14 of the Income and Corporation Taxes Act 1988[^f00021] or provisionally approved under section 655(5) of that Act;

• “public sector transfer arrangements” means arrangements recognised by the Secretary of State as providing reciprocal arrangements for the payment and receipt of transfer values between the Scheme and other occupational pension schemes;

• “qualifying service” is to be read in accordance with rule A.7;

• “reckonable service” is to be read in accordance with rule A.8;

• “re-employed active member” has the meaning given by rule G.1(3);

• “the Reserve Forces Pension Scheme” means the occupational pension scheme established by regulations made by the Defence Council, in exercise of the powers conferred on them by sections 4(2) and 8(1)(a) of the Reserve Forces Act 1996[^f00022];

• “retirement annuity contract” means a retirement annuity contract approved by the Commissioners of the Board of Inland Revenue under section 620 or 621 of the Income and Corporation Taxes Act 1988;

• “the Scheme” means the Armed Forces Pension Scheme 2005;

• “the Scheme actuary” means the actuary appointed by the Secretary of State for the time being to provide a consulting service on actuarial matters relevant to the Scheme;

• “the Scheme administrator”, in relation to a member or a function, means the person responsible for the day to day administration of the Scheme in relation to the member or in respect of the function;

• “the Scheme medical adviser” means the medical adviser appointed by the Secretary of State for the time being to provide a consulting service on medical matters relevant to the Scheme;

• “tax year” means a year of assessment for income tax purposes;

• “these Rules” means the rules of the Scheme set out in this Schedule;

• “stakeholder pension scheme” means a scheme which is a stakeholder pension scheme for the purposes of Part 1 of the Welfare Reform and Pensions Act 1999 (see section 1 of that Act[^f00023]);

• “state pension age” means pensionable age, as defined in section 181(1) of the Pension Schemes Act 1993[^f00024];

• “weekly rate”, in relation to a guaranteed minimum pension, has the same meaning as in regulation 55(1) of the Occupational Pension Schemes (Contracting-out) Regulations 1996[^f00025].