MOD has applied no abatement to the pay of HM Service personnel either prior to, or since, 31 March 1975, for the purpose of funding pension entitlements. The Armed Forces Pension Scheme 75 (AFPS 75) is, and always has been, non-contributory and unfunded. The military salary was introduced in 1970 and from 1971 the Armed Forces Pay Review Body (AFPRB) began to make recommendations regarding military salary following consideration of civilian comparators.
In 1981 the AFRPB recommended, following a Government Actuary's report, that the value of the AFPS 75 pension should be taken into consideration as part of overall earnings for service personnel during the process of remuneration comparison and in judging the appropriate levels of military salaries. As a result an adjustment was introduced by the AFPRB in making their overall pay recommendations to reflect the non-contributory value of AFPS 75 benefits as compared with the contributory pension benefits of comparator employees.
The Ministry of Defence pays employers superannuation contributions which cover the future pension liabilities which are accruing for personnel while they are serving in the armed forces. The rate of the MOD contributions is set by the Government Actuary's Department.
The actual funding for the payment of armed forces pensions comes directly from the Treasury as for other public sector pensions and is administered through the MOD as annually managed expenditure. The annual budget for the payment of armed forces pensions is contained within a single Request for Resources submitted separately from the Defence Budget and Accounts for the scheme are published annually and laid before Parliament.