The Armed Forces Pension Scheme Order 2005

12.—(1) Rule E.16 is amended as follows—

(2) In paragraph (1) for the second sentence substitute—

• “This is subject to paragraph (2) to (7).”.

(3) After paragraph (5) insert—

“(6) The amount of the lump sum is restricted as mentioned in paragraph (7) in the case of an active member—

(a) who is a retained rights member, and

(b) whose pensionable earnings in the first year in which he is an active member equalled or exceeded one quarter of the permitted maximum, as defined in section 590C(2) of the Income and Corporation Taxes Act 1988, for the tax year in which that first year ends.

(7) The amount of the lump sum must not exceed the greater of—

(a) four times the member’s final pensionable earnings, less the value of his retained benefits, and

(b) £5,000.

(8) A person is a retained rights member for the purposes of these Rules if he is entitled to, or has received, relevant benefits (as defined in section 611(1) of the Income and Corporation Taxes Act 1988) accrued under—

(a) an approved scheme (as defined in section 612 of that Act),

(b) a relevant statutory scheme (as defined in section 611A of that Act),

(c) a fund to which section 608 of that Act applies,

(d) a retirement benefits scheme (as defined in section 611 of that Act) accepted by the Commissioners of the Board of Inland Revenue as a scheme which corresponds as mentioned in section 596(2)(b) of that Act,

(e) a contract or trust scheme approved under section 620 of that Act, or

(f) a personal pension scheme.

(9) In these Rules “retained benefits”, in relation to a person who is a retained rights member, means the benefits by virtue of which he is such a member.

(10) For the purposes of paragraph (8)—

(a) benefits that accrued under the Scheme are disregarded, and

(b) relevant benefits are disregarded if—

(i) the member’s pensionable earnings in the first year in which he is an active member do not exceed one quarter of the permitted maximum, as defined in section 590C(2) of that Act, for the tax year in which that first year ends, or

(ii) in the case of lump sum benefits, they do not exceed £2,500.”.