HC Deb 18 December 1987 vol 124 cc1356-65

Motion made, and Question proposed, That this House do now adjourn.—(Mr. David Hunt).

9.36 am
Mr. Neil Thorne (Ilford, South)

During national emergencies we rely completely on the dedication and self-sacrifice of our armed forces. Politicians are quick to praise the efforts of those who protect us at those times, particularly the professionals who provide the back bone for the reserve and conscript forces. It is therefore only right and proper that in their time of need we should do our best to help them, and now is one of those times.

Retired service men and their widows are suffering considerable financial hardship as a result of serious anomalies in the armed forces pension scheme, and those who have been retired the longest, and are therefore the oldest, have the smallest pensions. These inequities are due mainly to a system of block dates fom which the improvement becomes effective and also the impact of a temporary pay restraint policy that reduces permanently the pensions of those service men and their widows who are unfortunate enough to retire at that time.

Because service men have little choice over their dates of retirement, their pensions are calculated on a code system which covers a period from 1 April to 31 March in the following year and is designed to ensure that they receive the same rates of pension for equal rank and length of service, irrespective of their actual retiremant date in that particular code year. However, if there is a period of temporary pay restraint during the code year, the system can work fairly only if pay is maintained at a realistic level.

The Armed Forces Pay Review Body is allowed to recommend full rates of pay for the job, which are then deemed to be payments for pension purposes. That system of deeming was first used by Members of Parliament in 1976 to protect their pensions from the effects of the 1976–77 incomes policy. It was not until the 1978 code that Her Majesty's Government allowed it to be used by the armed forces, and consequently those who retired during 1976–77 code years are receiving substantially lower pensions than those of equal rank and length of service who retired before or after that date.

For example, the pension payable from 1 April 1987 to a major who retired retired under the 1977 code is £7,624, compared with £10,145 for a major who retired two years earlier. Similarly, a lieutenant-colonel who retired in 1977 receives a pension that is nearly £1,000 a year less than that received by a major who retired two years before. Such inequities also affect a widow's entitlement under the forces family pension, as she receives a proportion of her husband's pension. However, there is an even greater anomaly in widows' pensions: if her husband retired before 31 March 1973, she receives only a one-third compared to a one-half rate after that date.

A further serious anomaly is the treatment of officers who retired before 1960, whose pensions are based on a standard rate for maximum permissable reckonable service according to rank, and not on actual service. As service before the age of 21 does not count for pension purposes anyway, and because the majority served for longer periods than the reckonable maximum, it is common to find that an officer retiring in the years between 1945 and 1960 loses up to eight years of actual service in the calculation of his pension.

Again, that affects widows' pensions. To make matters worse, all those widows are only on the one-third rate. For example, the widow of a major who retired in 1956 receives a forces pension of £1,996 a year, compared to the half-rate pension of £3,586 for the widow of a major who retired with 22 years' reckonable service in 1987.

There are further serious inequities affecting widows. The widow of a post-retirement marriage prior to 6 April 1978 does not receive a forces family pension. Yet, through his act of service, the service man "buys" an entitlement for his widow to receive a pension, irrespective of the date of his marriage. Since, by their very nature, the contributions can never be refunded, service widows' pension rights must always remain "bought".

Then there is the position of the older war widows whose husbands retired before 31 March 1973, and who are therefore not entitled to the Ministry of Defence attributable forces family pension, which is paid with no minimum service qualification required from the husband, at a rate for each rank, and is equal to 90 per cent. of the husband's full career pension. Yet what actually matters is that those women's husbands died for their country, not when they died.

That has caused an enormous gap between the financial treatment of older war widows and that of those whose husbands retired after 31 March 1973. They all receive state war widows' pension, which for the war widow of a private soldier aged over 70 is currently £3,244, and for the war widow of a major is £3,341. However, in addition, the war widow of, for example, a private soldier killed in the Falklands receives from the MOD an attributable forces family pension of £3,117, and the war widow of a major receives £8,703 a year. However, the war widow of a service man killed in the second world war, or in Korea, receives a forces family pension from the MoD only if her husband served for long enough to earn a pension. The majority did not.

There are many other anomalies. For example, on a second bereavement a widow who was receiving a forces family pension from her first husband can have her pension restored only subject to a means test. Because of the rule about post-retirement widows' pensions, that poses a real moral dilemma, and puts the widow who wishes to remarry a service man who is already retired in the position of having to decide whether it is worth marrying him and risking the loss of her forces family pension, rather than simply living with him. That cannot be right.

Moreover, because of Her Majesty's Government's refusal to allow "deeming" during a period of pay restraint, the date of retirement for service men has become a lottery. Those who retired during the first half of 1984 are particularly hard hit. This will create further bitterness, and the policy can only lead to future manning problems.

All those anomalies have been represented many times over the past 10 years to Ministers, but the Government have maintained that they cannot afford the cost of correcting them, as such correction would also have to apply throughout the public sector. However, service men, because of the conditions under which they serve, are in a special category among public servants. The code system used for calculating their pensions is unique and they are denied the averaging system used by all other public sector schemes, which avoids the worst effects of pay restraint on pensions. No other public-sector group is subject to the age restriction of service before 21 not counting for pension provision, and they all base pensions on actual service.

Service men's widows, especially war widows, are certainly in a special category.

All our major NATO allies treat their service men's widows more fairly than we do, with a minimum pension of one half and no restrictions on the date of marriage or retirement. The Government maintain that it is a "principle" that improvements to pension schemes cannot be made retrospective, but we are dealing with working rules and practices that should be kept under review, and updated as necessary.

In 1983, the Officers Pension Society's chairman, Admiral Sir Peter White, wrote to the Prime Minister: A Serviceman, when he joins, accepts that he may be required to give his life for his Country and on occasion he has to do just that. Therefore we believe we are different; we believe the public accepts that we are different, and we believe that recent events in the Falklands underline that view point. In reply, the Prime Minister wrote on 30 November 1983: I respect the Officers Pension Society's view that Servicemen are, for the reasons given in your letter, in a special category among public servants. The Officers Pension Society is continuing its campaign. The General Secretary, Major General L. W. A. Gingell, and the Assistant General Secretary, Group Captain F. Vincent, now maintain that the pattern of service life is different, involving Frequent moves causing difficulties of owning property, educating children, and establishing 'roots' … Frequent separations (e.g. Falklands, Northern Ireland, Belize, seagoing duty) causing family hardship and problems … Service wives find it difficult to obtain employment … Servicemen have to respond 'at the drop of a hat' to orders. There is no Trade Union … Servicemen are expected to work 24 hours a day when called on. There is no overtime pay for unsocial hours … Servicemen are expected to put their trust in the Government to protect their interests. There is no Court of Appeal … It is expected that they will give 'good and faithful military service' to the Government. They have no right to strike. All those factors amount to the fact that service men and service women are in a different category from the remainder of the Civil Service. Arguments in the past have relied on the fact that civil servants are trying to protect the Government from having to pay out additional funds. I think that that view is wrong. We cannot possibly believe that service men are in the same category as all other civil servants.

It is particularly hard on widows of service personnel who have married after completing their service. Service men have been discouraged from marrying early. Before the last war, serving officers were not allowed marriage allowances until they were 30 years old, and since the war that has been reviewed only to 25. Married officers required accommodation, and had children to educate; they were therefore discouraged from marrying early, and many accordingly married after completing their service. Their wives are completely abandoned by the state if they retired before 1973. That is wrong, when they were holding off from marrying on behalf of the state.

The advertising for service personnel that we promote tries to encourage the belief that, by giving their working lives to the protection of the state, service men in return will be looked after by the state. I feel that they are being particularly badly let down. We say to them, "Avoid the rat race — come and do something much more worthwhile. Look after your country, and we shall look after you." But we are really saying, "You must watch us as employers. If you do not, you are likely to be shortchanged." That is neither fair nor reasonable. We now have an opportunity to put these matters right.

The matters to which I have referred apply to all ranks in the services. The Officers Pension Society watches carefully what happens to other retired service personnel. The effects in the period 1976–77 and, I am sad to say, in 1984–85 leave much to be desired. For example, a major who retired in 1975 would now be drawing a pension of £10,145 a year. However, if he retired in 1976 he would now be drawing only £8,472 a year, and if he had retired in 1977 he would be drawing £7,624. It is not until 1978 that the figure starts to go up again, rising to £8,768. A major who retired in 1986 would not be as well off as one who retired in 1975, because he would be drawing £9,928. That is an unfortunate situation, and, as I have said, other ranks suffer just as badly.

In that respect we should not allow ourselves to indulge in the luxury of saying that, because we have managed to get away with that, we do not have to correct it. Service personnel have a right to look to the Government to make the correction. A sergeant who retired in 1975 would now be receiving a pension of £3,986, whereas one who retired in 1977 would be receiving only £3,147.

The problem is summed up extremely well by Wing Commander, Hurst W.E.B. who has retired from the Royal Air Force and now lives in Suffolk. In February of this year he wrote: I am particularly unfortunate in that I completed my full term of service at the age of 55 on 31 May 1973 and would normally have retired on that date but, at that time the RAF was short of engineers and called for qualified officers to serve for an additional three years (making my total service just short of 42 years). I was pleased to do this as the Royal Air Force was my life. I had complete trust in my employer and it never occurred to me that I might be financially penalised by 'staying on' but I estimate that my volunteering to extend my service to help the RAF has cost me about £10,000, (less tax). That is deplorable. I urge my hon. Friend the Minister to correct it as a matter of honour.

9.52 am
Mr. Bill Walker (Tayside, North)

I congratulate my hon. Friend the Member for Ilford, South (Mr. Thorne) on selecting this topic for debate, and I welcome the opportunity to say a few words. I wish to speak particularly about the situation affecting widows and war widows. I remind my hon. Friend the Minister that the wives of service men are pretty unique individuals. They are very like the wives of Members of Parliament. They are called upon to be constantly moved around. They have upsets to their domestic situation. They have enormous pressures on their families during their husbands' service careers. All of that calls for individuals of a particular type who can stand up to the problems. In addition to that they live with the constant knowledge that their husbands may be called upon any day to sacrifice their lives for their country.

Before the Falklands war few of us expected that we would be sending a task force to the south Atlantic. I remember vividly what one young marine from 45 Commando said to me. The Commando had sailed but the marines were still back at their base at Condor because they had been away on a course. He was terribly upset. The signal came in saying that they were to join the Commando at Ascension and the young marine was delighted. At a dinner we were holding on behalf of the marines, he turned to me and said, "We'll show them what we get paid for." By Jove, he did. He won a Military Cross. However, what is important is that he lived. Many of his colleagues did not. On a recent visit to the Falklands I photographed the war graves and sent the photographs back to the members of 45 Commando and the dependants of those who had been killed.

I remind my hon. Friend the Minister that war widows in that war were looked after much better than war widows of the second world war. The war widows of the second world war are now getting rather old, and I believe that the time has come for the nation to say that those ladies should be well looked after. We are enjoying freedom, democracy and the rule of law today because their husbands sacrificed their lives.

I should also like to deal with those widows who married when their husbands had completed their military service. My hon. Friend the Member for Ilford, South explained why the services prefer young officers to be unmarried. One understands why. However, one can only say that it seems rather odd that we encourage young men not to marry and that, when they complete their service, as many of them do at an early age of between 45 and 55, and then marry, their widows do not enjoy the same pension rights as they would heve enjoyed if they had married even during the last years of their service. That anomaly should be put right.

In those circumstances, and in the short time available to me, I make a plea on behalf of those widows. There are many things I could say, because I believe that the nation owes its service men, not least those who regularly go on active service in Northern Ireland and other parts of the world, an enormous debt. It carries on for 365 days of the year, every year. It is because of that that we should look after the widows and ensure that they are never left feeling badly treated or short-changed by a nation that did not understand or, worse still, probably did not care. I believe that the Government, with their fine record of caring, particularly for the way in which they have treated the armed forces and improved pay and conditions, should look at what we can do for the widows, because that would be appreciated and understood throughout the country.

9.56 am
Miss Emma Nicholson (Torridge and Devon, West)

My interest in this important debate rises from my four years as Conservative party vice-chairman for women. Like my hon. Friends the Members for Ilford, South (Mr. Thorne) and Tayside, North (Mr. Walker) I speak on behalf of the widows. My constituency has a high number of service widows and the unfairnesses of the present system are brought to my notice almost daily.

I pay tribute, on behalf of the Officers Pensions Society, to my hon. Friend the Minister. It has unstinting praise for him, not necessarily for this readiness to unlock the purse strings but for his quick understanding which I suggested to the society was in part derived from his substantive financial background.

I ask the Minister to think about three things and I shall start with the future widows of current service men. The Green Paper on the reform of social security in June 1985 and the White Paper published in December 1985, speaking of pensions and women, said that changes in the national insurance widows benefit scheme should be seen against the background of the greater involvement of women in the work force. As previous speakers have said, there are intolerable difficulties for the modern woman in keeping her career going when marrying into the services. I ask the Minister to bear in mind the future widows and perhaps leave some legacy within his Department when he moves on and up so that their rights will be fully looked after.

I want to put on record the great difficulty faced by post-retirement marriages when a service man dies. I know how difficult it is for the Government to pick that up because of the supposed knock-on effect. I endorse what was said by my hon. Friend the Member for Ilford, South when he said that the services are different.

I want to put on record a particularly poignant case. Mrs. Phillott of Tavistock married her husband after he took early retirement at Government request. He joined the Army when he was 13 and made it his life. His pride in his medals was superb. He left the Army in February 1959, not on completion of his service, which would have been November 1964. The discharge certificate states that the reason for his discharge was a reduction in the establishment. Had he served to his proper retirement age his widow — he was married and had two children—would now be receiving a pension.

Most importantly, I beg the Minister to look carefully at the case of older war widows and to help them. Deprived of their husband, perhaps after a short service during war years, they are elderly and poor. I join my hon. Friend the Member for Tayside, North in asking whether we cannot do better in a time of rapidly increasing prosperity under this Government. There are huge gaps between the Falklands war widows, older war widows and all service pensioners. Their case is most urgent and, as they are getting older, it is one that we must hasten to put right. I beg the Minister to help them.

10 am

The Parliamentary Under-Secretary of State for the Armed Forces (Mr. Roger Freeman)

I congratulate my hon. Friend the Member for Ilford, South (Mr. Thorne) on securing this important Adjournment debate and on the eloquent and persuasive way in which he and my hon. Friends the Members for Tayside, North (Mr. Walker) and Torridge and Devon, West (Miss Nicholson) have argued the case for improving the position of those who retired from the armed forces in previous years—and their widows—who do not receive pensions at the levels that are now current. I am sure that we all recognise the value of the service that they have given their country. I endorse what my hon. Friend the Member for Tayside, North said in respect of the service men and women whom he knows.

I should pay tribute to the various organisations which have so courteously and clearly made representations to the Secretary of State for Defence. They include the Officers Pension Society, the Royal British Legion, the War Widows Association and the British Limbless Ex-Servicemen's Association.

I shall address the points that my hon. Friends have raised in a moment, but first I shall set out the background against which they should be considered. In dealing with service pensions we should recognise that there are two separate sets of provision under which benefits may be paid to ex-service men and their dependents. On the one hand there is a war pensions scheme, which is administered by the Department of Health and Social Security. It provides benefits specifically in cases when a member of the armed forces is injured or dies as a result of his service. On the other hand, there is the armed forces' own pension scheme, which is administered by the Ministry of Defence. It is the provisions of that scheme, for which I am responsible, that are under discussion today.

The armed forces pension scheme is an occupational one. It is therefore broadly similar to other public service pension schemes, although there are a number of features that are designed to reflect the somewhat difficult characteristics of service in the armed forces and the relatively short careers that apply to many. My hon. Friend the Member for Ilford, South referred to those difficult characteristics and to the different nature of life in the armed forces compared with other parts of public service or civilian life. Those features are in addition to the special provision for the greater physical risks that may arise, which are provided for by the war pension scheme.

Pensions must be paid for. In this particular case there is no capital cash fund from which the costs are met. It is not like a funded pension scheme. There are no direct contributions and benefits are paid for, as they arise, from money allocated to the defence Vote each year. In that regard, it is a pay-as-you-go scheme.

I do not wish to imply, however, that service personnel are completely insulated from the cost of providing for their pensions. When setting armed forces' pay a deduction is met of about 10 per cent. — it obviously depends on the grade of service being provided—which represents the service men's pension contribution. Service men and women — officers and other ranks — are contributing to their future pension.

As with an occupational pension scheme, that for the armed forces is therefore managed in accordance with the same principles that apply to other schemes. There are two important and allied points; first, entitlements under the scheme are for any individual, and through him his dependants, derived from the rules of the scheme that are in force at the date of his retirement. Secondly, when rules are changed, those changes are not given retrospective effect. It must be obvious to my hon. Friends that, if occupational pension schemes always had to make retrospective changes, improvements would be less frequent. It is a matter of resources. The House may wish to know that the cost of the armed forces' pension scheme in the current year—1987–88—is estimated to be £1,050 million, and that comes out of the defence Vote. That figure will rise significantly over the next 10 years.

The detailed rules of the armed forces pension scheme are inevitably complex, but I should remind the House of the main features of the scheme as they stand today. They provide for a pension, which is paid immediately on retirement, for officers who have given 16 years or more of reckonable service; a pension, which is paid immediately on retirement, for other ranks who have given 22 years or more of reckonable service; deferred pensions, which are payable from the age of 60, for those who served for shorter periods, and that is subject to a minimum of five years; pensions for widows and dependent children; immediate pensions for those who are invalided from service on account of injury or ill health, which is subject to a minimum of five years' service; enhanced benefits where that injury or ill health is attributed to service in the forces, with no minimum qualifying period of service; and enhanced benefits for widows and dependent children for those whose death is attributed to service.

All those pensions are index-linked. Long service and invalidity pensions are calculated from representative rates of pay for each rank and on length of service given. For a full career, which is based on retirement at age 55, the pension is equivalent to half the corresponding rate of pay, with, in addition, a tax-free lump sum of three times the annual rate of pension awarded.

Many service men have to retire early, so the early rate of pensions paid for shorter periods of service is enhanced to be better than strictly proportional to the service given. That is to compensate for the short career, which may be all that is available. As I have already said, service men can retire on pension by about the age of 40—after 22 years' service, having entered the armed forces at the age of 18.

I have already said that lump sums are paid on retirement at the end of a full career. They are also paid on a similar basis where pensions are awarded for shorter periods of service, and where invaliding occurs, and additional lump sums are paid where injury or death is attributed to service.

Those, briefly, are the main benefits that are available today. However, as with other pension schemes, there have been developments over the years that have gradually introduced changes and improvements in what is provided, which have created anomalies. Among those have been, in 1960, the introduction of scales for officers linked to length of service instead of standard rates for service of at least a minimum length; in 1972, a substantial revision following the introduction of the military salary, and introducing a direct link with representative rates of pay; in 1973, to improve the benefits available for injury and for widows; in 1975, to introduce deferred pensions for short periods of service; and, in 1978, to introduce pensions for the widows of post-retirement marriages.

Against that background I shall briefly address the key points that have been raised. Many of them are associated with improvements that have been made in the past and would involve retrospection. A number of them arose from developments that were not particularly associated with the armed forces, but which formed part of general improvement of pension provision in public service schemes. For those in particular, a departure from the normal concept of non-retrospection would require corresponding action throughout the public service.

My hon. Friend the Member for Ilford, South referred to the pensions trough for those who retired in certain years—the mid-1970s—and who now receive a pension less than those who retired immediately before or after them. It is acknowledged that those who retired in the period of pay retraint policies receive less by way of pension than colleagues with the same qualification of rank and service who retired earlier or later. However, they received the awards to which they were entitiled under the circumstances that applied at the time of their retirement. The variation in pensions is a result, on the one hand, of increases in basic pension awards due to index-linking, which continued to operate in full during the period of restraint on pay—there was a comparatively high rate of inflation at the time, so increases were significant—and on the other, for those who retired subsequently, the improvements in pay that followed restraint.

When the Government took office in 1979 the position was carefully examined to see whether it was practical to take special action to overcome the effects of pay restraint on pensions, which applied widely across the public sector. Various solutions were considered but no satisfactory arrangement could be found.

Cost was one factor—in 1979 it was estimated to be as much as £100 million. It has been suggested that the subsequent improvement in the economic situation should make it possible to overcome that. However, demands on public expenditure remain very heavy and all claims for additional expenditure, whether large or small, must be judged on the basis of priorities. The Government remain of the view that the use of still scarce resources to resolve the trough situation could not be justified.

My hon. Friend the Member for Ilford, South also referred to the anomalies between those widows who receive the one-third rate pension as opposed to the one-half rate pension. In 1973 the proportion of a man's pension that would be paid to his widow was increased. For men who left the armed forces before 1 April 1973 the proportion was one third. For those who retired subsequently the proportion was increased to one half, but this applied only to that part of their service from 1 April 1973. They did, however, have the option of making direct contributions to qualify previous service for the one-half rate. To have provided the same option to men who had already left the service would have involved retrospection, with the associated additional cost to be met by the Government. Similar arrangements applied in other public service schemes.

My hon. Friend referred to the particular case of officers who retired under the code in force before 1960. At that time retirement pay was not linked to the length of service given, other than that a minimum period from the age of 21 was necessary to qualify for the standard rate. Therefore, officers served a standard length of service. When a revised structure was introduced in 1960, with scales of retired pay linked to years of service—that was a distinct and sensible improvement — the change was not made retrospective. That was in accordance with the practice at the time and the normal practice since then of not making improvements and enhancements in the occupational pension schemes retrospective. The same was true of the improvements that were made to the provisions for pensions for other ranks in the years following world war 2.

My hon. Friends have raised the question of post-retirement marriages. The Ministry of Defence, as a good employer, pays a widow's pension without any direct contribution being made by the husband. However, that does not mean that the pension is automatically earned by service. Until April 1978 the Department, in common with those responsible for all other public service schemes, considered it right to restrict the payment of a widow's pension to those who had shared at least some part of their husband's career. From 6 April 1978, again in common with other public service schemes, the armed forces have also provided for widow's pensions where marriage takes place after retirement. The pension is proportional to that earned by the husband from that date only.

Mr. Thorne

Will my hon. Friend give way?

Mr. Freeman

I have a short time left, but I shall give way.

Mr. Thorne

We sense my hon. Friend's concern about this matter and know that his reputation with the Officers Pension Society and the other societies is extremely good. In view of the anomalies I wonder whether my hon. Friend would undertake to consider the possibility of setting up an inquiry to determine whether some special arrangements should be made to help widows and those who have suffered so much from the trough, which has not affected other civil servants who have the benefit of choosing the best 12 months out of the 36-month period prior to retirement for pension purposes.

Mr. Freeman

Concern has been expressed about the war widows, especially the elderly widows. My hon. Friend is aware that that is a matter for the Department of Health and Social Security as it administers and pays the war widows' scheme. We pay a separate and additional war widows' pension for service since 1973.

I assure my hon. Friend that I shall draw this debate to the attention of my hon. and noble Friend the Minister at the Department of Health and Social Security. I shall have further meetings with him to discuss this matter—it is not a matter primarily for me, but I shall continue those discussions.

My hon. Friend asks for an inquiry to consider the anomalies created. We are all aware of the facts and an inquiry is not needed to elucidate them. The Ministry and the societies are also aware of those facts. However, I assure my hon. Friend that I shall continue discussions not only with the Officers Pension Society but with the four organisations that I have mentioned to consider what improvements can be made. I cannot hold out any hope of improvements in terms of resources, but in terms of procedures, discovery of the facts and a better understanding of the anomalies, I assure my hon. Friends that I shall give all the strength at my command and all the time that I have available to pursue the points that they have raised.