Changes to the Local Overseas Allowance (LOA)
From 1 July 2021, the way in which the Armed Forces’ Local Overseas Allowance (LOA) is calculated will be changing. LOA is intended to contribute towards the additional local cost of day-to-day living when Service personnel are assigned overseas.
Eligibility for LOA remains the same. It will still be paid automatically alongside the monthly salary.
The new package is made up of the LOA daily rate and two needs-based provisions that contribute towards your overseas private vehicle and respite (travel and accommodation) costs.
One of the most significant changes will be the introduction of a single band for all Service personnel regardless of rank, removing the previous rank-based banding system.
Split Net Pay (update)
When the new LOA package was first announced on 1 February 2021, the policy included the cessation of Split Net Pay as a routine mechanism to transfer a portion of Service personnel pay and allowances into an overseas bank account. Noting various factors such as the impact of Brexit on bank charges and transfers as well as the current international economic climate, the policy regarding Split Net Pay has been reversed. The new LOA package will have no impact on access to the Split Net Pay facility which will continue to be made available to service personnel in receipt of LOA.
Overseas Private Vehicle Provision (OPVP)
From 1 April 2021 Service personnel who are permanently assigned overseas and receive Local Overseas Allowance (LOA) will have access to a new Overseas Private Vehicle Provision (OPVP).
OPVP assists Service personnel with access to a private motor vehicle in a LOA area. The provision will be an additional but separate contribution to the new LOA; due to be implemented from 1 July 2021.
The OPVP will be paid up to a (capped) lump sum on proof of expenditure of a vehicle. This will replace the old Car buy/Sell contribution that was paid in most Main Station locations where contributions were spread across the course of an assignment. The change has been introduced to better support Service personnel with significant one-off costs when they need it most.
The rate of OPVP is capped at £975. Depending on the circumstances of the Service person, OPVP can be claimed on assignment into and, with effect from 1 July 2021, out of the overseas location. This means that in some cases Service personnel will be able to claim up to a total of circa £1950 (e.g. £975 into the overseas location and £975 out of the overseas location). Service personnel returning from an overseas assignment cannot claim OPVP until 1 July 2021.
Please click here to read a directed letter from the MOD which gives more detail into the provision and transitionary arrangements.
Transition to the new package
All Service personnel receiving LOA on 30 June 2021 will automatically transfer on to the new package on 1 July 2021. However, any locations that see a significant reduction in the daily rate of LOA, will have their rates reduced over a period of up to three years (1 July 2021 to 1 July 2024). All increases in rates will immediately take full effect on 1 July 2021.
Rates will be available to Service personnel from June 2021. Please click here to read a guidance from the government’s website. You can watch a short explanatory video below:
- The Armed Forces Remuneration team have been working hard to get the word out about the forthcoming LOA policy change, and have been delivering roadshows to serving people at overseas locations. They are listening to your feedback and where possible have made amendments. They have also put together some FAQs to help you, which will be further developed as more roadshows take place. We will keep you updated.
- As a result of the changes to the LOA, we received some feedback on a few areas, including Split Pay and Private Vehicle Provision, which we put to the MOD Team. They have provided the below information in response:
The LOA review of 2015 was an extremely thorough process in which the single Services were consulted at every step. The implementation programme has similarly involved the single Services and the proposals have been agreed by the Defence Secretary, Minister for Defence People and Veterans, Chief of Defence People and the Military People Leadership Team.
The feedback that we are receiving is helping us to address the LOA issues that Service personnel are most concerned about. In listening to such feedback, we recently re-examined the proposed removal of Split Net Pay and I can inform you that it will now remain available on its current basis. I can also clarify another of the points concerning Overseas Private Vehicle Provision (OPVP). In the new LOA, the vehicle element will no longer be paid as part of the core LOA contribution. In the new model, the OPVP becomes better targeted and will be claimed at the point of vehicle related expenditure which is when the individual will realise the most practical benefit from it. Further detail on the OPVP will be released in March and April ahead of the new LOA being implemented in July. (See this Directed Letter for update)
The supporting communications plan for LOA is phased and has been signed off by the Secretary of State. The first phase was focused on raising awareness for the change so that Service personnel and their families had time to ask questions and understand what the change means for them. We also ensured that Senior Chains of Command received the information, ahead of a programme of virtual roadshows that the Armed Forces Remuneration team are currently presenting through February and March to talk through the new LOA in more detail and take on board feedback. Two presentations are planned in the USA, on 4th March and 9th March. This will be accompanied by further material being made available ahead of the implementation on 01 July 21. A major step was the recent release, by the single Services, of our more detailed briefing packs for the benefit of local Commanders and Unit Administration staff around the world. We are also arranging a similar presentation for senior UK based Commands in order to raise awareness among those who are likely to serve abroad in the future.
We are very well aware that the key issue for many is ‘how much will my new LOA rate be?’ We are being very open with Commands and with Service personnel that we cannot answer that until late May/early June. This is because the data upon which the initial set of rates will be calculated will not be available to us until April ‘21. By adhering to this timetable, we will be able to ensure that the new LOA rates will be based on the most up to date economic information available. I can also confirm that the 2015 LOA Review had no remit to achieve cost savings and that the ‘new LOA’ will be broadly cost neutral in comparison with the existing model.