Armed Forces: Pension Scheme (Hansard, 9 July 1996)

The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe)
My Lords, 172 Sir Michael Bett's report on personnel issues in the Armed Forces included a number of recommendations on pensions. We have been studying all of his proposals carefully and hope to make a further announcement shortly on progress and our proposed way forward.

§ Lord Carver
My Lords, I thank the noble Earl for that interesting reply. When introducing a new scheme, can he ensure that the opportunity is taken to remedy the anomalies and injustices of the current scheme which would have been remedied by the amendments tabled to the Pensions Bill by my noble friend Lord Freyberg? They were accepted by this House but regrettably rejected in another place on the Government's advice.

Earl Howe
My Lords, I fully understand the concerns expressed by the noble and gallant Lord. We aim to reach our own view on what is required in the areas covered in Sir Michael's report. We are giving all his recommendations the most careful consideration. However, I need to sound a note of caution on the specific point raised by the noble and gallant Lord. Sir Michael Bett's recommendations were essentially aimed at the needs of the services in the future. The outcome of the Government's consideration of his report is unlikely to affect our position on retrospective changes to the existing scheme.

§ Lord Vivian
My Lords, will my noble friend agree that any change to the time when full pensions are paid to servicemen and women on completion of 22 years' service could bring about an exodus of well-trained, senior NCOs from all three services?

Earl Howe
My Lords, I am grateful to my noble friend for sounding that note of warning. We have taken no decision about when service pensions should be paid, and certainly no decisions about whether we should stop paying service pensions at the age of 40. We are still examining Sir Michael's recommendations about the career incentives which he suggested should underpin his recommended career structures, and his recommendations about changes to the current Armed Forces pension scheme, alongside all the other recommendations.

§ Lord Chalfont
My Lords, when the Government pronounce upon the Bett proposals will they clear up the apparent misunderstanding about whether or not forces' pensions are contributory? Although the contribution to the pensions is deducted from remuneration at source, apparently these are not regarded as contributory pensions. I wonder why that is. Will the Government ensure that people in the forces have a properly funded pension scheme similar to that which applies outside the Armed Forces?

Earl Howe
My Lords, I believe that there has been a certain amount of confusion between a contributory pension scheme and a funded scheme. All serving members derive benefits from the current Armed Forces pension scheme. The longer the service, the greater the 173 benefit that accrues. However, that is quite different from the question of whether the scheme should be a funded scheme, or, as at present, an unfunded scheme. We are giving that matter close consideration.

§ Lord Williams of Elvel
My Lords, in his Answer, the Minister stated that the Government would be making a statement shortly on the recommendations of the Bett Report. Does "shortly" mean before the House rises for the Summer Recess, or does it mean that the statement will be made possibly on the August bank holiday?

Earl Howe
My Lords, we are aiming to make an announcement before the House rises. However, I am not in a position to make any promises in that regard. We are working hard to meet the deadline about which your Lordships are aware. I cannot be more specific than that.

§ Lord Campbell of Alloway
My Lords, in view of the existing anomalous situation, can consideration also be given to an element of retroactive effect?

Earl Howe
My Lords, I understand my noble friend's concern on this question. Your Lordships have engaged in a number of powerful debates on this issue in the past. It is difficult to look at retrospective adjustments on cost grounds. It is also difficult to do so as a matter of principle. It is fair to say that none of the improvements introduced into the pension scheme in the 1970s could have been afforded if they had had to be extended retrospectively to recognise previous service; and that remains the case today.

§ Viscount Allenby of Megiddo
My Lords, will the Government ensure that any new scheme takes full account of the special needs of the Armed Forces for a full pension at an earlier age than other government services, in order to keep the services younger, able and fit to fight?

Earl Howe
My Lords, I am grateful to the noble Viscount. Any new scheme that we create will have to meet the needs of the services. It will need to bear comparison with equivalent schemes outside the services.

§ Lord Craig of Radley
My Lords, following divorce, will the wife of a serviceman receive a share of his pension for life? Would it not be reasonable in equity that the widow of a serviceman should receive the attributable forces family pension for her life, regardless of her future marital status?

Earl Howe
My Lords, as the noble and gallant Lord will be aware, pensions for life for widows are an issue which Sir Michael Bett raised. It is also an issue which affects all public service occupational schemes. The cessation of widows' pensions on remarriage, with discretion to restore them as and when that remarriage ends, is already common to all public service schemes.