Citation, commencement and interpretation

1. —(1) This Order may be cited as the Armed Forces Pension Scheme etc. (Amendment) Order 2009 and comes into force on 6 ^th April 2009.

(2) In this Order—

“the EDP Scheme Order” means the Armed Forces Early Departure Payments Scheme Order 2005( 3 ); and

“the AFPS 2005” means the Armed Forces Pension Scheme 2005 established by article 2(1) of the Armed Forces Pension Scheme Order 2005( 4 ) and set out in Schedule 1 to that Order.

Amendments to the EDP Scheme Order

2. The EDP Scheme Order is amended in accordance with articles 3 5 .

Inflation adjustments in determining final relevant earnings for early departure payment awards

3. For article 7 substitute—

“ Inflation adjustments in determining final relevant earnings

7. —(1) For the purpose of determining a person’s final relevant earnings under article 6, the amount of relevant earnings, as determined in accordance with article 6, for that part of the period of 365 days that falls 365 days or more before the last day of service is adjusted for inflation.

(2) If the member’s final relevant earnings are determined in accordance with paragraph (1) to be an amount for any period in relation to which any adjustment for inflation has been made under this article, then, except as provided in article 11(2) and (3), the member’s final relevant earnings are to be taken for all purposes to be the amount so determined after that adjustment.

(3) The reference in paragraph (1) to adjusting for inflation the amount of relevant earnings for part of a period is a reference to increasing it by the same amount as that by which an annual pension of an amount equal to those earnings would have been increased under the Pensions (Increase) Act 1971 ( 5 ) on the day following the last day of relevant service if the pension—

(a) were eligible to be so increased, and

(b) had come into payment on the day following the last day of that period. ” .

Inflation adjustments: supplementary

4. —(1)Article 11 (increases for inflation) is amended as follows.

(2) In paragraph (1) after “article 7” insert “in determining the amount of the person’s final relevant earnings”.

(3) For paragraphs (2) to (4) substitute—

“ (2) For the purposes of determining the annual amount of the payments to be calculated in accordance with article 10(6), any adjustment required by article 7 is disregarded, and accordingly, the person’s actual total relevant earnings for the 365 consecutive days applicable in the person’s case under article 6(1) is taken to be the amount of the person’s final relevant earnings.

(3) But the payments calculated in accordance with article 10(6) must be increased by the same amount which they would be increased under the Pensions (Increase) Act 1971 if they were payments of pension so calculated and the pension was eligible to be increased under that Act. ” .

Effect of entering further military service on early departure payment awards

5. —(1)Article 12 (effect of rejoining armed forces or entering certain reserve forces service on article 9 award) is amended as follows.

(2) In paragraph (1)—

(a) omit “or” at the end of sub-paragraph (c);

(b) at the end of sub-paragraph (d) for “;” substitute “,”; and

(c) after sub-paragraph (d) insert—

“ or

(e) enters service to which Part 3 or 4 of Chapter 6 of the Territorial Army Regulations 1978 ( 6 ) applies (non-regular permanent staff officers or soldiers); ” .

(3) In paragraph (5) for “paragraph (1)(c) or (d)” substitute “paragraph (1)(c), (d) or (e)”.

Amendments to the AFPS 2005

6. The AFPS 2005 is amended in accordance with articles 7 12 .

Inflation adjustments in determining final pensionable earnings for the AFPS 2005

7. For rule A.5 substitute—

“ A.5 Inflation adjustments in determining final pensionable earnings

(1) For the purpose of determining which is the greatest amount mentioned in rule A.4(1), the amount of pensionable earnings, as determined in accordance with rule A.4, for that part of the period of 365 days that falls 365 days or more before the last day of service is adjusted for inflation.

(2) Any adjustment made for the purpose of determining final pensionable earnings shall be disregarded for all other purposes of the Scheme.

(3) The reference in paragraph (1) to adjusting for inflation the amount of pensionable earnings for part of a period is a reference to increasing it by the same amount as that by which an annual pension of an amount equal to those earnings would have been increased under the Pensions (Increase) Act 1971 on the day following the last day of reckonable service if the pension—

(a) were eligible to be so increased, and

(b) had come into payment on the day following the last day of that period. ” .

Gratuity-earning service

8. —(1) In rule A.7 (qualifying service) in paragraph (1)—

(a) omit “and” at the end of sub-paragraph (d);

(b) at the end of sub-paragraph (e) substitute “,” for “.”; and

(c) after sub-paragraph (e) insert—

“ (f) in the case of a person whose service was gratuity-earning service before its terms were changed and who meets the condition in paragraph (1A), that period of gratuity-earning service, and

(g) in the case of a person who was paid a gratuity on the satisfactory completion of gratuity-earning service and has repaid that gratuity together with interest at the Bank of England base rate, calculated on a monthly basis, from the day after the last day of service in respect of which the gratuity was awarded to the day before the date of re-entry within the period of one year of becoming an active member of this Scheme, that completed service.

(1A) The condition referred to in paragraph (1)(f) and rule A.8(1)(h) is that the person has surrendered all rights to a gratuity in respect of the gratuity-earning service in consideration for which the person becomes eligible for membership of this Scheme. ” .

(2) In rule A.8 (reckonable service) in paragraph (1)—

(a) omit “and” at the end of sub-paragraph (f);

(b) at the end of sub-paragraph (g) substitute “,” for “.”; and

(c) after sub-paragraph (g) insert—

“ (h) in the case of a person whose service was gratuity-earning service before its terms were changed and the person meets the condition in rule A.7(1A), that period of gratuity-earning service, and

(i) in the case of a person who was paid a gratuity on the satisfactory completion of gratuity-earning service (as so defined) and has repaid that gratuity together with interest at the Bank of England base rate, calculated on a monthly basis, from the day after the last day of service in respect of which the gratuity was awarded to the day before the date of re-entry within the period of one year of becoming an active member of this Scheme, that completed service. ” .

(3) In rule A.1 (interpretation: general) after the definition of “final pensionable earnings” insert—

“ “gratuity-earning service” means service on a short service commission on terms providing that the person serving is not eligible to be a member of this Scheme or the AFPS 1975, but will be eligible for the payment of a gratuity on leaving service, subject to the satisfactory completion of that person’s service; ” .

Disregard of short breaks in service

9. —(1) Rule A.10 (disregard of short breaks in service) is amended as follows—

(a) in paragraph (1) for “If” substitute “Subject to paragraph (1A), if”;

(b) after paragraph (1) insert—

“ (1A) Where an active member meets the conditions in paragraph (1)(a) and (b) and rejoins at a lower rank than the substantive rank held at the end of the earlier service, the member may opt for paragraph (1) to apply, such option may be exercised at any time during the later service. ” ;

(c) after paragraph (3) insert—

“ (4) Paragraph (1A) does not apply if before the time when the condition in paragraph (1)(b) is met, a pension has come into payment for the earlier period of service. ” .

(2) In rule E.3 (amount of pensions under rules E.1 and E.2: active members) after paragraph (4) insert—

“ (4A) If immediately before the member’s death he was entitled to exercise the option under rule A.10(1A), then unless paragraph (5) applies, these Rules apply as if the member had exercised that option before his death. ” .

Pension credit members’ pensions

10. For paragraph (3) of rule D.3 (pension credit members’ pensions) substitute—

“ (3) The pension and any lump sum become payable—

(a) where the pension sharing order is made before 6 ^th April 2009—

(i) immediately on the pension credit member reaching pension benefit age, or

(ii) if it is later, when the pension sharing order under which the member is entitled to the pension credit takes effect;

(b) where the pension sharing order is made on or after 6 ^th April 2009—

(i) immediately on the pension credit member reaching pension age, or

(ii) if it is later, when the pension sharing order under which the member is entitled to the pension credit takes effect. ” .

11. For rule D.4 (early payment of pensions with actuarial reduction) substitute—

“ D.4 Early payment of pensions with actuarial reduction

(1) A member who is not entitled to immediate payment of a pension under rule D.1, D.2 or D.3(3)(b)(i) may opt for immediate payment of a reduced pension and lump sum if the member has reached pension age and either paragraph (2) or paragraph (3) applies.

(2) This paragraph applies if the member—

(a) meets the condition in rule D.2(1)(a) or (b); and

(b) has ceased to be in service that qualifies him to belong to the Scheme.

(3) This paragraph applies if—

(a) the member is a pension credit member;

(b) the pension sharing order from which the pension credit rights derive was made before 6th April 2009; and

(c) that order has taken effect.

(4) If a member exercises the option under this rule, the amount of the annual pension to which the member becomes entitled is first calculated as mentioned in rule D.2(3) or D.3(5) and then that amount is reduced by such amount as the Secretary of State determines after consulting the Scheme actuary.

(5) If a member exercises the option under this rule, the amount of the lump sum to which the member becomes entitled is first calculated as mentioned in rule D.2(4) or D.3(5) and then that amount is reduced by such amount as the Secretary of State determines after consulting the Scheme actuary.

(6) The option under this rule may only be exercised by notice in writing to the Scheme administrator in such form as the Secretary of State requires. ” .

Other amendments to the AFPS 2005

12. —(1) In rule A.4 (meaning of “final pensionable earnings”) in paragraph (4) for “for the purposes of that paragraph” substitute “for the purposes of those paragraphs”.

(2) In paragraph (3) of rule B.4 (joining the Scheme after service begins) in subparagraph (b) omit the words “after consultation with the Scheme medical adviser”.

(3) In rule D.5 (early payment of benefits: active members with permanent serious ill-health) in paragraph (2) for “For the purposes of these Rules” substitute “For the purposes of this rule and rule D.8”.

(4) In rule D.7 (early payment of benefits: deferred members with permanent serious ill-health)—

(a) in paragraph (1)(a) for “(see rule D.5(2) and (3))” substitute “(see rule D.5(3) and paragraph (4) below),”; and

(b) after paragraph (3) insert—

“ (4) For the purposes of this Rule a member’s breakdown in health is “permanent” if, in the opinion of the Secretary of State, it will continue at least until the member reaches pension benefit age. ” .

(5) In rule D.8 (member’s requests for review of ill-health awards) for paragraph (7) substitute—

“ (7) If on any review under paragraph (4), the Secretary of State is of the opinion that—

(a) the member has suffered such a breakdown as is mentioned in paragraph (4)(a), but

(b) the condition by virtue of which he became entitled to the pension under rule D.6 has deteriorated so that he suffered such a breakdown later,

then the member’s entitlement to a pension under rule D.6 ceases and the member is entitled to a pension calculated in accordance with paragraph (7A) from the date on which the review was requested.

(7A) The pension to which a member is entitled under paragraph (7) shall consist of—

(a) a pension calculated under rule D.5, and

(b) an increase in that pension by an amount equivalent to the amount that a pension would be increased if the option to exchange a lump sum under rule D.10 were exercised where the amount of the lump sum exchanged is the difference between the lump sum paid to the member under rule D.6 and the lump sum which the member would have received had the member been entitled to it under rule D.5. ” .

(6) In rule D.10 (option to exchange lump sum for pension) in paragraph (1) for “an increase in the amount of pension payable to himself or to any other person under these Rules” substitute—

“ an increase—

(a) in the amount of pension payable to himself under these Rules, or

(b) in the amount of pension payable to himself and to any other person under these Rules as a result of his membership of the Scheme. ” .

(7) In rule D.11 (option for members in serious ill-health to exchange whole pension for lump sum) omit paragraph (4).