GAD understand that payments from the Early Departure Payment Scheme are not benefits payable from a Registered Pension Scheme. These benefits are therefore unaffected by AA Scheme Pays benefit offsets.

Some members may breach the Annual Allowance on more than one occasion during their careers. Since there is not a limit on the number of times a member may opt to utilise scheme pays (subject to usual eligibility), a member may also have multiple AA Scheme Pays offsets. In this circumstance each offset can be considered separately and treated in accordance with the relevant guidance.

It is possible for members to have both AA Scheme Pays offsets and pension debits resulting from Pension Sharing on Divorce (PSOD). In this case each instance of the AA Scheme Pays offset or the PSOD pension debits is treated in accordance with the relevant set of guidance.

Where a member who has transitioned into AFPS15 subsequently receives an Annual Allowance charge the MOD will apportion the tax charges appropriately between AFPS15 and the other AFPS in which the accrued rights were built up. Separate scheme pays offsets will then be calculated individually, for each scheme in isolation, and applied to the benefits payable from that scheme. Where this occurs, the point at which the pension benefits begin to be drawn from each scheme, and so the point at which the scheme pays offsets are implemented, may not necessarily be the same.

In the unlikely event that an AFPS75 member who exited service with deferred benefits has an Annual Allowance scheme pays offset the calculation of offsets will need to be considered at the members first deferred pension payment age (i.e. age 60). These cases should be approached on an individual basis after seeking guidance from the MOD pension policy team and GAD.

Some members of the AFPS are able to exercise options at the point of retirement, such as allocation or inverse commutation in the AFPS05 scheme, or commutation in AFPS15. This paper does not attempt to illustrate the interaction between AA scheme pays offsets and any of these member options. For example, scheme pays offsets applied to AFPS15 benefits would be expected to affect the maximum amount of pension that can be commuted at retirement.

The MOD has liaised with HMRC and understands that Section 237E of the Finance Act 2004 does not specify when the just and reasonable adjustment to the member's entitlement to benefits should be deemed to occur. It is necessary for the MOD to determine this, as once a benefit adjustment is deemed to have occurred it will be necessary to reflect this in subsequent Pension Input Periods, when determining whether the Annual Allowance has been breached.

We understand that the MOD's policy is that the calculation of the initial benefit offsets, in accordance with the section Calculation of the initial benefit offsets - member not in receipt of pension benefits (AFPS75, AFPS05, FTRS and RFPS) and the section Calculation of the initial benefit offsets - tax charge attributable to AFPS15 - or member in receipt of pension benefits (all schemes) of this guidance, would not generally imply that a consequential benefit adjustment has occurred. In most cases the adjustment would therefore only be deemed to occur at the point at which the scheme pays offset is applied to the members benefits, generally at the point where the section Adjusting the initial benefit offsets when they are applied other than at age 65 of this guidance is applied. Where necessary, the administrators should seek further guidance from the MOD pension policy unit if it is unclear whether any particular benefit offset should be included in a subsequent Annual Allowance calculation.