Ministers have been accused of launching a “stealth clawback” of military pensions, leaving veterans who claim benefits thousands of pounds worse off.
Officials at the Department for Work and Pensions (DWP) have informed veterans that their military pension is considered “unearned income” and will therefore result in a pound-for-pound reduction in benefits.
In some cases this has resulted in veterans being ordered to repay tens of thousands of pounds, as well as having their monthly benefit payments reduced.
A group of former military servicemen plan to bring a legal challenge against Pat McFadden, the Work and Pensions Secretary, in an effort to overturn the rules.
Peter Sharples, the chief executive of the Veterans Institute, has experienced the issue himself. He said he had been in touch with “hundreds” of others who had been affected in recent months.
After applying in March 2024 for his military pension to be paid out three years early because of his “crippling” health issues, he informed the DWP, who told him this was “fine” and that it would not affect his benefits.
But in January 2025, he was told that he must repay £8,800 and would have his benefits cut by £463 each month – the value of his military pension.
Not only that, but his terminal gratuity payment – a tax-free lump sum that veterans receive at retirement – had been classed as “capital” by the DWP, meaning that it would also lead to a reduction in his benefits.
He appealed against the decision but a judge ruled earlier this year in the DWP’s favour, saying it had acted in line with its own rules.
‘It contravenes Armed Forces Covenant’
Now Mr Sharples and others intend to bring a judicial review in an attempt to get the system overhauled so that military pensions are treated as “earned income”, meaning that they will not affect benefits.
Mr Sharples, 59, believes that the DWP is undertaking a “stealth clawback of service reward” by using military pensions and terminal gratuity payments as a way to reduce benefits.
He believes this contravenes the Armed Forces Covenant, which promises that those who have served in the Armed Forces will be treated fairly.
“My case is similar to many thousands of veterans out there. Some have been chased for £20,000 or £30,000. It’s clearly targeted,” Mr Sharples told The Telegraph. “Classing the military pensions as earned income would change the lives of thousands of veterans up and down the country.”
In recent months, parliamentary questions have been asked by MPs about Armed Forces pensions being treated as unearned income for calculating Universal Credit.
Mr Sharples believes that the DWP has recently launched a crackdown on benefits claimants in receipt of “unearned income”, and that military veterans appear to have been caught up in it.
There are 68,000 people in Britain who claim Universal Credit and have previously served in the Army, according to official figures. Of these, a proportion will be at or nearing retirement age, which means that they are likely to be affected by the DWP’s enforcement action.
Tony Norris, 64, from East Yorkshire, who served in the Queen’s Own Hussars cavalry regiment for 13 years, said that shortly after his wife died, he was contacted by the DWP about their decision to strip him, in effect, of his military pension.