The Armed Forces Pension Scheme Order 2005

3.  After rule A.5 insert—

A.5A.    Inland Revenue restrictions on final pensionable earnings

(1) In the case of a Class A member, if the calculation under rule A.4(1) produces an amount exceeding the permitted maximum, the excess is disregarded except to the extent that paragraph (2) applies.

(2) If the member is a Class A member with reckonable service within rule A.8(1)(d) or (f) (reckonable service the member is entitled to count as a result of a transfer in or his being an AFPS 1975 transferee), and either—

(a) paragraph 20 of Schedule 6 to the Finance Act 1989 did not apply to the member when he was a member of the scheme from which the transfer was accepted or, as the case may be, the AFPS 1975 and neither did any equivalent scheme provision, or

(b) that paragraph applied with the modification made by paragraph 5 of the Retirement Benefits Schemes (Continuation of Rights etc.) Regulations 1990 as respects benefits derived from service under another scheme (“earlier service”) or a scheme provision made equivalent provision,

paragraph (1) does not apply in calculating any benefit to the extent that the benefit is calculated by reference to the reckonable service within rule A.8(1)(d) or, as the case may be, rule A.8(1)(f), or (in either case) so much of that reckonable service as is earlier service.

(3) For the purposes of these Rules—

(a) a member is a Class A member unless—

(i) he is to be treated as not being such a member under an agreement with the Commissioners of the Board of Inland Revenue because immediately before joining the Scheme he was an active member of another occupational pension scheme under the rules of which his benefits were not limited by reference to the permitted maximum,

(ii) he has continued to be an active member of the Scheme since he joined it or meets conditions A to C or condition D in relation to any period during which he was not such a member, and

(iii) he has elected not to be treated as a Class A member, and

(b) “permitted maximum”, in relation to a member, means the amount defined as such in section 590C(2) of the Income and Corporation Taxes Act 1988 for the tax year in which the member’s active membership period ends.

(4) Condition A is that during the period the person was on secondment or a posting to another employer.

(5) Condition B is that at the beginning of the period the person had a definite expectation that he would become an active member again when the secondment or posting ended.

(6) Condition C is that the person became an active member again at the end of the period.

(7) Condition D is that the period did not exceed one month and at the end of it he immediately became an active member again.”.