Military Finance/Money Picture Copyright: BFBS
Money And Finance

Changes To Allowances: All The Gen

What will these changes mean for Armed Forces personnel serving abroad?

Military Finance/Money Picture Copyright: BFBS

The allowances members of the Armed Forces are entitled to are set to change.

The Ministry of Defence has announced that the Local Overseas Allowance (LOA), the allowances paid to military personnel based overseas, will be significantly altered in the summer.

The current LOA rules allow Armed Forces personnel serving overseas to be awarded a daily rate in addition to pay to go towards extra living costs incurred while serving abroad. Crucially, the amount paid to the individual depends on their rank and location. This is set to be changed.

In describing the changes, the Ministry of Defence said:

“This modernisation means service personnel will see changes to the rates of LOA, which could increase, although some will decrease depending on the current rank-related level they receive and the location they serve. This new transparent system means the amount offered to service personnel will not be associated to rank.”

What Are The Changes?

The new daily rate will be set by the following factors:

Cost of Living (CoL): Determined by the difference in the cost of living between the UK and the overseas location.

Environmental Factor (EF): Reflecting the lived experience of the overseas location compared to the UK.

Location Factor (LF): A contribution towards any additional expenses including banking charges and other necessary costs specific to the overseas location.

Additional Contributions Include:

Included in the new LOA package is a new Respite Provision - a financial contribution towards accommodation and travel costs when taking a short break away from the duty station.

There will also be a new Private Vehicle Provision – to help cover the cost of shipping one vehicle to and from current duty station, Motor Mileage Allowance (MMA) and subsistence for two vehicles and charges incurred when cancelling a vehicle lease.

Each of these additional contributions will be paid as lump sum upon proof of expenditure.

Payment Of Salary And Allowances While Overseas

From July 1, 2021, personnel will no longer be able to have their wages (or LOA) paid directly into an overseas bank account. Personnel will be responsible for arranging their wages and LOA to be paid via direct debit, from their UK bank to any overseas accounts that they are using – although there will be financial help available for any transfer costs.

Military Finance/Money Picture Copyright: BFBS

Will You Lose Out Financially?

Senior ranks may see a reduction in the money they receive in certain locations. Junior service members will see an increase in their allowances.

When Will The New LOA Rates Be Announced?

From June, the new Local Overseas Allowance (LOA) rates will be made available to service personnel.

Those facing a significant reduction in LOA will see the new rates introduced steadily over a three year period to help soften the blow. The new rates are to be changed over a period of up to three years (From July 1, 2021).