The Armed Forces Pension Regulations 2014

CHAPTER 4 Options

General option to exchange part of the pension for lump sum

59.—(1) A member may opt to exchange part of a pension to which the member would otherwise be entitled for a lump sum.

(2) If a member so opts, for every £1 by which the amount of the member’s annual rate of pension is reduced, the member is to be paid a lump sum of £12.

(3) A member may not exchange pension for lump sum under this regulation to the extent that it would result in a scheme chargeable payment for the purpose of Part 4 of the FA 2004 (see section 241 of that Act).

(4) This regulation does not apply to a pension derived from pension credit rights if the pension debit member from whose rights the pension is derived has exercised the option before the date on which the pension sharing order takes effect.

(5) The option under this regulation must be exercised by notice in writing to the scheme administrator in such form as the scheme manager requires no earlier than 6 months and no later than 1 month before the first pension payment is made.

(6) An option exercised under paragraph (1) must apply to added pension and earned pension to which a member is entitled in equal proportions.

Option for members in serious ill-health to exchange whole pension for lump sum

60.—(1) An active member, deferred member or pension credit member may opt to exchange the whole of the member’s pension under this Part for a lump sum if the scheme manager—

(a) is satisfied that the member is expected to live for less than 12 months; and

(b) has received evidence from a registered medical practitioner that this is the case.

(2) The option must be exercised before the pension becomes payable.

(3) A member who exercises the option is to be paid as soon as is reasonably practicable.

(4) Where an active member exercises the option, the amount of the lump sum is equal to the total annual amount of an ill-health pension under regulation 51 (entitlement to ill-health pension: active member with permanent serious ill health), multiplied by 5.

(5) Where a deferred member exercises the option, the amount of the lump sum is equal to the total amount of ill health pension under regulation 56 (entitlement to ill health pension: deferred member with permanent serious ill health), multiplied by 5.

(6) Where a pension credit member exercises the option, the amount of the lump sum is equivalent, in the opinion of the scheme manager, having regard to guidance from the scheme actuary, to the value of their pension credit rights.

(7) In paragraph (4) and (5), “annual amount” in relation to a pension means the sum of the following amounts—

(a) the amount of the annual rate of the pension to which the member would be entitled under this Part apart from the option; and

(b) the amount of any increase in the annual rate of pension payable under the PIA 1971, calculated—

(i) as at the time payment would otherwise first be due; but

(ii) disregarding any service that the member might have accrued if the member had continued in service until that time.

(8) An option under this regulation is to be exercised by notice in writing to the scheme administrator in such form as the scheme manager requires.