Armed forces pension and Universal Credit: a service pension counts in full as income, while war pension and compensation payments are ignored.
The rules split along one line. What you earned a pension for, your years of service, is counted. Compensation for an injury caused by service mostly is not. Several kinds of forces money can land in one household, and sorting them is quicker on the phone. An FCA-authorised adviser calls you without charge after you complete this page's enquiry form.
Universal Credit is for people under State Pension age. The last section covers what changes after that.
Does an armed forces pension reduce Universal Credit?
Yes. DWP's Armed Forces guidance says the "Armed Forces Service Pension counts in full as income for Universal Credit." GOV.UK's page on what you will get also lists Armed Forces Pensions among the benefits that reduce a payment, pound for pound.
Pay from a job is only partly deducted. Unearned income, which is where a pension sits, is deducted in full: the regulations take off "all of the claimant's unearned income (or in the case of joint claimants all of their combined unearned income) in respect of the assessment period". In a couple, a partner's pension therefore counts too.
Universal Credit is worked out monthly, so a pension paid weekly or four-weekly is converted. Under regulation 73 a weekly payment is multiplied by 52 and divided by 12. A pension increase each April changes the figure that is counted; the page on armed forces pension increases explains how it is set.
Which armed forces payments does Universal Credit ignore?
DWP tells its own staff to check which armed forces pension or benefit is in payment so that it is treated correctly. Its guidance table sorts them as follows.
| Payment | Effect on Universal Credit (DWP Armed Forces guidance, version 7) |
|---|---|
| Armed forces service pension (AFPS 75, 05 or 15) | Counts in full as income |
| Armed Forces Compensation Scheme regular payments, including the Guaranteed Income Payment | Not taken into account as income |
| Armed Forces Independence Payment | Not taken into account as income |
| War Disablement Pension (War Pension) | Not taken into account as income |
| Service Attributable Pension (SAP or SARP), a non-taxable pension for a medical discharge caused by service | Not taken into account as income |
| Service Invaliding Pension (SIP or SIRP) | Only the non-taxable part is not taken into account; the rest counts as income. MoD confirms a tax-exempt pension by letter |
Survivors' pensions split the same way. The regulations count only the kinds of income they list, and DWP's guidance for its decision makers says: "If a type of income is not listed above, it does not affect the claimant's award." A War Widow(er) Pension is not on that list, so it is not counted; war widow's pension rates covers the amounts. A widow's, widower's or partner's pension from AFPS 75, 05 or 15 is income from an occupational pension scheme, which the list includes, so it counts in full.
The Guaranteed Income Payment is the Armed Forces Compensation Scheme's "lifelong, tax-free, inflation-proof income" for a lasting service injury. Anyone who receives it, or a War Pension, is also exempt from the benefit cap, according to the same guidance.
How each of these awards is made is set out in armed forces medical, disability and war pensions. If a payment carries another name on your letter, an adviser can explain how it is handled, at no charge, once you send the form here.
How are lump sums treated for Universal Credit?
As capital, once you have them. The regulations take the whole of a person's capital into account unless a rule disregards it. A lump sum at retirement comes in two forms. AFPS 05 pays "a one-off pension lump sum (tax-free) of 3 times your annual pension", while AFPS 15 "will not automatically pay you a pension lump sum", though you can create one by commutation. Tax is a separate question, answered in is my armed forces pension taxable.
The limits are these. A claimant must have "£16,000 or less in money, savings and investments", and above £6,000 the payment is reduced "by £4.35 for every £250 you have between £6,000 and £16,000". Reservists' training bounty is also capital, and has to be reported. A big lump sum can therefore reduce Universal Credit or end the claim.
Compensation lump sums are different. "All AFCS awards include a lump sum paid for the injury", and DWP's guidance points to the personal injury rules in its capital guidance. Regulation 75 covers sums paid in consequence of a personal injury and says a sum paid within the past 12 months that is not in trust is disregarded as capital, and capital in a trust derived from the sum is disregarded too. Whether your particular award qualifies, and for how long, is for DWP to decide.
One warning applies to every lump sum. Giving money away or spending it to claim more is treated as still having it: someone can be treated as still holding capital they disposed of to secure Universal Credit, or a larger payment. Paying off a debt or a reasonable purchase is not caught.
Reporting changes to Universal Credit
You need to "report changes as soon as they happen", and GOV.UK warns that "a delay could mean you get too little or too much Universal Credit". Changes include "changes to your savings, investments and how much money you have", so a lump sum belongs on the list. A pension that starts, or a newly awarded payment, changes your income too, so report that as well.
A change can affect the whole assessment period, not only the days after you report it, and any overpayment has to be paid back. Report through your Universal Credit account. A mistake on the scheme side is a different matter and has its own page, armed forces pension overpayments.
What changes at State Pension age?
A couple can carry on if only one has reached it, and the claim "will stop when you both reach State Pension age". Pension Credit is the benefit that follows, and GOV.UK says it will stop if you or your partner claim Universal Credit. See who gets Pension Credit for how pensions count there.
The State Pension is separate from a forces pension. It is "usually based on your own National Insurance record", and the guide to the UK State Pension explains how it is worked out. DWP, through your Universal Credit account, and MoneyHelper answer questions free too. Seeing the State Pension and forces pension side by side takes one phone call. The enquiry form gets an FCA-authorised adviser calling you, and that costs nothing.
What people ask about forces pensions, benefits and State Pension
Is an armed forces pension unearned income?
The service pension is, and is counted at its full amount. Compensation and war pension payments are treated differently, as the table above shows.
Can I claim Universal Credit and keep my War Pension?
Yes, you can get both. Neither a War Pension nor a War Widow(er) Pension counts as income for Universal Credit, though the savings limit and other conditions still apply. The War Pension Scheme asks you to tell it when you start getting another DWP benefit, because it may reduce a War Pension so that you are not compensated twice for the same disablement.
Are armed forces pensions contracted out?
GOV.UK's guidance is that most employees were contracted out at some stage before April 2016, and it suggests asking an employer or pension provider to confirm whether you were. Contracting out ended for everyone on 5 April 2016. The page on contracted-out State Pension explains the effect.
Do armed forces get the State Pension?
The State Pension rests on National Insurance, not on a forces pension, so one does not replace the other. Your armed forces pension amount is a different figure.
Unsure which rule applies to your payments? Whoever phones you after the enquiry form here will be an FCA-authorised adviser who sits down with your award letters at no cost to you.