The Armed Forces Pension Scheme (AFPS) has seen its liabilities increase by 19 per cent to £233.1bn between March 2019 and March 2020, according to the scheme’s annual report and accounts.

The report from the Ministry of Defence (MOD) showed that this leaves the scheme’s deficit at £233.1bn, as it is wholly unfunded.

Employees do not contribute to the scheme but employer contributions were for 63.5 per cent of pay, compared to 50.4 per cent in the year before, while current service costs as a percentage of pay climbed from 76.5 per cent to 80.9 per cent.

The report explained that a past service cost of £1bn had been determined in respect of the additional liabilities for the indexation and equalisation of Guaranteed Minimum Pensions (GMP) in public service pension schemes for members reaching state pension age after 6 April 2021.

Additionally, a past service cost of £0.04bn in respect of a legal challenge regarding survivor benefits provided in public service schemes was included, as was a negative past service cost of £0.92bn which was determined in respect of the change of scope of members covered by the McCloud judgment.

The defined benefit scheme has 190,000 active members and total annual pensionable pay of around £5.7bn, along with 423,000 deferred members and total deferred annual pensions of £1.1bn.

The number of members with pensions in payment stood at 405,000, with their annual pensions amounting to £4.2bn.

Speaking about the pandemic’s effect on making her calculations for the report, Government Actuary’s Department actuary, Joanne Rigby, said: “The long-term salary assumption is set by MOD having taken actuarial advice, and is intended to be an average over the future careers of scheme members, with a recognition that increases in any particular year may be lower or higher than the assumption.

“The increase in the amount of government debt being taken on to pay for its response to the Covid-19 pandemic is likely to affect salary growth. However, at this stage, it is too early to speculate on the potential impacts for the long-term salary growth.

“Therefore, I do not believe there is any information to justify changing the salary assumption.”

Share Story: