The Armed Forces Compensation Scheme

The Armed Forces Compensation Scheme (AFCS) – a new compensation package for members and former members of the Armed Forces – starts on 6 April this year. It covers all regulars and ex-regulars (including Ghurkhas), and reserve and ex-reserve men and women whose injury, ill-health or death is caused by service on or after 6 April 2005.

People injured before this date and anyone receiving a current war disablement pension or war widow/widowers’ pension are affected by the new scheme; their entitlements remain under the war pensions scheme.

The AFCS will update arrangements and focus on the more severely disabled, providing compensation for the significant injuries, illness and death that are caused by service, warlike incidents or terrorism. It is a ‘no fault’ scheme so individuals can still sue the MoD for negligence.

Its main elements are:

• lump sum based on a 15-level tariff
• a graduated Guaranteed Income Payment (GIP), calculated from both earnings and the severity of the condition, payable for life to ex-Service people who expect a significant loss of earning capacity
• a GIP paid to surviving spouses and partners (including same-sex partners)
• bereavement grant payable in certain circumstances
• entitlement to payment for dependent children.

Tariff levels depend on the degree of severity. Level 1 gives the highest payment, covering the most severe conditions, such as loss of sight and hearing or severe spinal cord injury. Level 15 might cover minor burns or a broken toe. Those on Levels 1 to 11 will get a GIP, calculated by multiplying pensionable pay by an age factor. (The younger the individual the higher the factor because there will be more years to normal retirement age.) GIP awards are reduced by pension or similar benefits paid by the MoD or, for reserves, employers.

Some examples may be helpful.

• A person is invalided out of the Armed Forces having lost a foot as a result of service. Salary was £20,000 and the relevant age factor (23) is 0.878. Full annual GIP is: £20,000 x 0.878 (salary x GIP factor) = £17,560. As the injury is at tariff Level 8, they will receive 50 per cent of full GIP, £8,780 per year, tax free. Their Armed Forces ill-health pension of £3,619 is deducted, so they will get a top-up of £5,161 in addition to the pension.

• A Service person aged 28 on a salary of £25,000 dies as a result of service. The GIP factor for that age is 0.853. Full annual GIP (salary x GIP factor) is £25,000 x 0.853 = £21,325. As death was caused by service, 100 per cent of the full GIP is used as the starting point for the Survivor’s GIP calculation. As the benefit is being paid to the spouse, Survivor’s GIP is 60 per cent of full GIP, so the dependant is entitled to £12,795 (0.6 x £21,325) per year. If the survivor is entitled to an Armed Forces pension of £5,000, GIP is reduced by 75 per cent of this pension and is paid at £9,045.

The scheme will not cover home to duty travel. However, it will cover travel:

• on detached duty
• to and from operations and exercises abroad
• to emergency call-out
• to and from Service Family Accommodation where none can be provided within 50 miles of place of work.

It will also cover injuries caused by:

• Service-related physical development activities including adventure training, physical education, exercise and sport approved by the relevant Service authorities
• authorised training for military physical fitness or swimming tests
• playing in mandated and recognised sports events
• officials and organisers of the above.

All Service people will automatically be covered by the new scheme from 6 April this year, even if they choose to remain in the current pension scheme. There will be an internal reconsideration and appeals process. Decisions can also be appealed.

Generally, there will be a five-year time limit on claims. There is no routine review process because awards are intended to be full and final, taking normal expected deterioration of a condition into account. Where the long-term prognosis for an injury is uncertain, an interim award will be made. Its length will be specified and it can then be extended for up to two years. Within this time a reassessment of the condition will take place so the award can be confirmed, raised or lowered.

Retirement compensation awards will remain tax free but dependants’ benefits will continue to be taxed. The new lump sums given to people who are still serving will also be subject to income tax.

For further details access the Veterans Agency (VA) website at www.veteransagency.mod.uk or the MoD website at www.mod.uk/issues/pensions. Alternatively, call the VA free helpline on 0800 169 2277 (overseas +44 1253 866043) or e-mail help@veteransagency.mod.uk