By Marty Small – Regional Manager South West & Scotland
Following on from my colleague’s blog on; How do I get my AFPS pension and lump sum? I thought it was worth writing a blog on AFPS15 EDP, understanding when and why you may qualify for this if you leave before normal pension age.
Normal Pension Age
Under the rules & regulations for AFPS15, to qualify for a pension at exit you must serve until age 60 or over, if you leave before age 60, your AFPS15 pension is deferred until State Pension Age.
The Early Departure Payment (EDP) Scheme aims to retain personnel in Service through to at least age 40 and to compensate for the fact that a full career to age 60 (normal pension age) or beyond is not available to most personnel. The EDP is a benefit which is entirely separate to any pension you may be entitled to in the Public Sector and is unique to the Armed Forces.
How do I know if I’m eligible?
To be eligible for an EDP, you will have to reach age 40 or over (but before the age of 60) and serve as a Regular for at least 20 years. This is known as the 20/40 EDP point.
What will I receive and when?
If you leave the Regular Armed Forces on or after the 20/40 EDP point but before age 60 (normal pension age), you will receive a tax-free lump sum, equal to 2.25 times your annual deferred pension. You will also receive a taxable monthly income, which is worth 34% of the value of your annual deferred pension. For each year served beyond the 20/40 EDP point, the value of the EDP will be increased by 0.85% of your deferred pension.
From age 55, the EDP income is adjusted to take account of annual increases in the Consumer Price Index. Since an EDP is not a pension, once you reach State Pension Age, the EDP income stops. At this point, your deferred pension becomes payable. It is important to remember that you must claim this pension from DBS Veterans UK.
If you qualify for an EDP, you will receive a tax-free EDP lump sum. You can choose to ‘give up’ your full EDP lump sum in order to increase your monthly EDP income. This is known as inverse commutation.
All the information above can be found in the GOV UK Armed Forces Pension Scheme 2015 Guidance Booklet. Armed Forces Pension Scheme 2015: your pension scheme explained (publishing.service.gov.uk)
If you would like further information on your Armed Forces Pension Scheme, including inverse commutation options and how to apply then please don’t hesitate to contact the WEA.