Home Resettlement Personal Finance Benefit Information Statements – What They Mean For You
|Benefit Information Statements – What They Mean For You|
The Forces Pension Society highlight the scope of the new 'Business Information Statements' and explain what to do if you want a forecast which you can rely on for financial planning...
The major reform of public sector pensions following the Hutton Review has had caused much wringing of hands as scheme members across the public sector find themselves transferred to new, for the most part, less generous schemes.
However, the introduction of AFPS 15 has brought with it several positive changes, one of which is the introduction of the Benefit Information Statement (BIS) to keep members up to date on the value of the pension they have built up. Annual statements detailing pension benefits earned have been issued widely to pension scheme members across the private and public sectors but, until now, nothing similar has been available for Service personnel and, whilst the BIS is by no means as comprehensive as other annual benefit statements we have seen, they are very much to be welcomed. The purpose of this article is to highlight the scope of the new BIS and to let you know what to do if you want a forecast which you can rely on for financial planning.
BISs will be issued shortly after the member’s birthday each year. The first BISs were issued to people with birthdays in August 2015 and then will be issued annually, after their birthday going forward, but only whilst they are still in the Armed Forces. This link with the member’s birthday makes absolute sense as normal pension ages (55 for AFPS 05 and 60 for AFPS 15, and Immediate Pension Point for AFPS 75) generally tie in with the individual’s date of birth.
Those leaving the Armed Forces with deferred or preserved benefits will receive the normal statement of benefits when they leave and will need to claim these benefits about six months before they are due to be paid. The claim for is AFPS Form 8 and is available on the Veterans UK website. They will not receive further BISs and, indeed, they will hear nothing more about their pension benefits until they choose to claim them.
The BIS is a snapshot of pension and Early Departure Payment Scheme benefits built up in current service - this includes protected benefits for those who have transferred to AFPS 15 from either AFPS 75 or AFPS 05. Thus, those of you aged 48 or over on 1 April 2015 who have always been in AFPS 75 or who transferred to AFPS 05 as part of the Offer To Transfer are likely to have information relating to only one scheme whereas those who were transferred to AFPS 15 will have information relating to more than one scheme but with benefits separated out into the elements which make up the total entitlement. It will give you the current value of the benefits and the dates on which they are due to be paid.
This snapshot is based on the information contained in your service record and you need to check that all your details are correct. If you find errors relating to your service details, you will need to report them to Defence Business Services in order to avoid the incorrect information being reused and the error being perpetuated.
The BIS will tell you how much your spouse or civil partner will receive if you die in service. Eligible (unmarried) partners are not entitled to pensions under AFPS 75 rules and they are not mentioned on the BIS, the production of which already involves all sorts of complex calculations. However, providing your unmarried partner qualifies under AFPS 05 and AFPS 15 eligibility rules, it is safe to take it that the spouse/civil partner benefits built up in AFPS 05 or AFPS 15 will also apply to them. The eligibility rules require that your unmarried partner lives with you and that he or she is financially dependent upon you or financially interdependent with you.
Veterans UK will check eligibility as sensitively as possible and you could help them to arrive at a swift decision by nominating your partner for your Death-in-Service lump sum, as this is evidence that you had the intention of protecting their financial wellbeing after your death. Other things which may help establish eligibility include a joint bank account, joint rent book, or perhaps a will or insurance policy one naming the other as a beneficiary. This list is not exhaustive.
Similarly children’s benefits are not mentioned in the BIS. This is because the qualification criteria differ from scheme to scheme. For example, AFPS 75 requires that, in order to be entitled to benefits normally the child has to be the child of a marriage which took place before you left the Service, and that applies to natural, adopted and step children. In very specific circumstances the grandchild or an AFPS 75 member or his spouse/civil partner could qualify for a pension as could an illegitimate child but to include all this would make the BIS an unnecessarily complicated document. AFPS 05 and AFPS 15 contain no such marriage requirement.
Although arrived at by the use of complex underlying calculations, the BIS will not include anything other than your basic entitlements. If you have taken out contracts to purchase Added Years, Added Pension or have other additional benefits, these will not be shown. Neither will the BIS detail bonuses, supplements, benefits you may have transferred in from other schemes or the effect of Pension Sharing Orders or other divorce settlements. If you are doing any serious financial planning, obviously you will need these aspects of your pension to be taken into account.
You will see from what I have said that, whilst a very welcome step forward, the BIS is not a tool to use to when organizing your financial future. It is a snapshot – it gives current values only – and does not encompass all aspects of your pension and its value.
To get figures that can be relied upon, you will need to ask for a pension forecast. You are entitled to one free forecast each year and this is obtained by submitting an AFPS Form 12 (for Regular personnel) or an AFPS form 13 (for Reserves). By definition, this forecast will look forward as far as your normal pension age, giving the value of benefits should you serve until that date but at current prices. It will also include those aspects of pension (Added Years, Transfers In, etc) that the BIS cannot accommodate.
When your forecast arrives, check it carefully. If you are unhappy checking it yourself, and you are a member of the Forces Pension Society, send it to us and we will check it for you. Remember, with both the BIS and the forecast, its accuracy will only be as good as the underlying data, which is not necessarily correct. Check, check and check again!
If you have questions about your Armed Forces Pension and you are a member of the Forces Pension Society, you can call the Society’s dedicated help line on 020 7735 0110 or find answers on its web site. If you are not yet a member, the cost is modest and benefits (in addition to the best available expert advice) include discounts on a range of useful products and services and the assurance that a dedicated organisation, independent of the Government, is there to help you get the most from your Armed Forces pension.
For more information, go to www.ForcesPensionSociety.org
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