Armed Forces Pension Scheme 15 (AFPS 15) – Ill-Health Benefits

By Marty Small – Regional Manager South West & Scotland WEA

If you leave the Armed Forces early because you are assessed as medically unfit for further military service, you may be awarded ill-health benefits to ease the transition into civilian life and to compensate you for the loss of your career. The type of benefits you will receive are dependent upon your individual circumstances and the degree of disability. 

For death, injury or illness which occurs as a result of your Service in the Armed Forces, additional compensation may be paid under the Armed Forces Compensation Scheme (AFCS). For injury or death caused by Service before April 2005, compensation may be paid under the War Pension Scheme (WPS) or Armed Forces Attributable Benefits (AFAB) scheme.

For more details, see Armed Forces Compensation Scheme (AFCS) - GOV.UK (www.gov.uk)

You will only be entitled to receive an ill-health award if you have vested in the scheme (completed 2 or more calendar years of qualifying service in any Armed Forces Pension Scheme).

 There are 3 levels of ill-health award that can be made if you are medically discharged under AFPS 15, depending on the severity of your medical condition.

Tier 1: A Tier 1 award is made if you are deemed to be unfit for service in the Armed Forces because of physical or mental impairment but your ability to obtain gainful civilian employment is not deemed to be significantly impaired. 

Tier 2: A Tier 2 award is made if you are deemed to have suffered a breakdown in health, as a result of which, your capacity for gainful employment is significantly impaired and is expected to remain so until you reach age 60.

Tier 3: A Tier 3 award is made for the most serious conditions and is granted if you are deemed to have suffered a permanent breakdown in health involving incapacity for any gainful full time employment.

Tier 1 Awards

If you are medically discharged because you are deemed to be unfit for further military service, but your ability to obtain gainful employment outside of the Armed Forces is not deemed to be significantly impaired, you will be awarded a tax-free lump sum to help you adjust to your new circumstances.

The award will be calculated on the basis of 1/8th of your final pensionable earnings (the best 365 consecutive days in the last 3 years) multiplied by the number of years’ service in AFPS 15, subject to a minimum of 6 months and a maximum of 24 months final pensionable earnings. If the calculation produces an award which would be greater than 24 months final pensionable earnings, the award is capped at 24 months. If the Tier 1 calculation produces an award that would be less than 6 months final pensionable earnings, it will be rounded up to equal 6 months.

If you transfer into AFPS 15 from a legacy Armed Forces pension scheme, your ill-health award will be based proportionately on time served within the AFPS 15 scheme and time served within the legacy scheme.  The proportion of time spent in legacy pension schemes will be calculated as per the rules of that scheme, and the proportion of time in AFPS 15 will be calculated using AFPS 15 rules.

Early Departure Payment Point

If you are discharged after reaching the EDP point, you will receive an EDP lump sum and monthly income instead of a Tier 1 lump sum (or whichever provides the greater amount).

Examples of Tier 1 Award Calculation:

Example A

An individual joins at age 20 and is medically discharged after 5 years’ service. Final pensionable earnings equal £20,000, the Tier 1 award is calculated as follows:

£20,000 divided by 8 (FPE) x 5 (Number of years service) = £12,500 (1/8 of pensionable earnings)

Example B

An individual joins at age 20 and is medically discharged after 2 years service. Final pensionable earnings equal £30,000, the Tier 1 award is calculated as follows:  £30,000 (FPE) divided by 8 x 2 (Number of years service) = £7,500       

As £7,500 is less than the minimum of 6 months pay, the Tier 1 award is increased to £15,000.

Example C

An individual joins at age 20 and is medically discharged after 17 years’ service. Final pensionable earnings equal £40,000, the Tier 1 award is calculated as follows:

£40,000 (FPE) divided by 8 x 17 (Number of years’ Service) = £85,000       

As this exceeds the maximum of two years pay, the lump sum award is reduced to £80,000.

You will not be able to receive both an EDP and a Tier 1 lump sum. If you receive an EDP, the monthly income will cease once you reach State Pension Age and will be replaced by the deferred pension.

All the information above can be found in the GOV UK Armed Forces Pension Scheme 15 Guidance Booklet. For further information on Ill-Health Benefits and examples of Tier 2 and Tier 3 awards please use link below.

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, please feel free to get in touch with the WEA.