§ 2.35 p.m.
§ [The Question was as follows:
§ To ask Her Majesty's Government whether it is the case, as seems to have been implied by the Parliamentary Secretary, Ministry of Defence, on Wednesday last, that the recent increase in the pensions of retired officers is calculated as 10 per cent. of the basic pension diminished by any portion which has been commuted on the ground that, the commutation having been made into sterling of a higher intrinsic value than it has to-day, no increment can fairly be expected in respect of it.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF DEFENCE (THE EARL OF GOSFORD)My Lords, in previous pensions increase schemes applicable to retired officers it has been the normal practice that increases in pensions should be assessed on the basic rate of retired pay after deducting the part of the pension which has been commuted, since commutations have always been regarded as final transactions that cannot be reopened. The 1956 increase is intended to do no more than relieve hardship among those public service 840 pensioners living on a fixed income who have suffered from the fall in the value of money. It follows that the increase is not awarded on that part of a pension which has been converted into capital and is no longer part of the current income of the pensioner.
The only exception to this has been the increases granted under the 1944, 1947 and 1954 pensions increase schemes which were calculated on the stabilised pension rate of 1935, irrespective of commutation in consideration of the special circumstances of the stabilisation. Her Majesty's Government have now decided, however, to modify the previous rule on commutations so that commutations which took or take place after the introduction of any pensions increase measure will be ignored in assessing the benefits accruing from that measure. The retired pay of officers eligible for increases as a result of this modification is being reassessed, and these increases will be payable from April 1, 1956.
LORD SALTOUNMy Lords, I am grateful to the noble Earl for that reply. May I ask him first, before asking any further supplementary question, whether the last portion of his reply applies to the increases of pensions which have just been awarded? One of them was paid on June 2.
THE EARL OF GOSFORDThat, in fact, is so but only in the event of an officer commuting any part of his pension after that scheme.
THE EARL OF GOSFORDI am afraid that this is an extremely difficult subject; it took me several hours to understand it myself. It works out like this. An officer who commutes a portion of his pension after the increase scheme will from now onwards be assessed on the pension including the part of his pension which he has commuted.
LORD SALTOUNI am grateful to the noble Earl. I recognise, of course, that if the cash were spent on dinners at the Ritz or buying a house, there would be great force in the attitude of Her Majesty's Government, but with regard to the recent increase and those officers who have commuted in the past, may I ask the noble Earl whether it is 841 not the case that the capital sum and the sterling income derived from it have lost their intrinsic value, in common with all currency? Would it not be fairer if each case were examined on its merits? Because there might be many occasions—I pointed one out last Wednesday—when the whole value of the commutation has been lost by the officer in consequence of the action of Her Majesty's Government themselves in recalling the officer for service in the war.
THE EARL OF GOSFORDThe retired officers who commuted their pensions did so of their own free will and received the full capital value at the time of commutation. Whether this transaction was remunerative or not to the officer concerned cannot be held to be the responsibility of the taxpayer. I will go into the question put by the noble Lord about looking into certain cases and let him have an answer later on.