§ Mr. SwayneTo ask the Secretary of State for Defence (1) how many Army service personnel have been granted service attributable pensions under the armed forces pension scheme since 1973; [32682]
(2) how many Army (a) war disablement pensions and (b) service attributable pensions were correctly treated for tax purposes since (i) 1973 and (ii) the earliest point for which he has recently examined the records; [32681]
(3) how many service personnel records remain to be examined in the effort to identify Army (a) war disablement pensions and (b) service attributable pensions which have been incorrectly treated for tax purposes; [32680]
1139W(4) what estimate he has made of the number of identified cases where tax has been incorrectly deducted from war disablement pensions and service attributable pensions; and if he will make a statement. [32679]
§ Dr. Moonie[holding answer 12 February 2002]: War Disablement Pensions (WDP) were recognised as being tax-free both before 1973 and since. As WDPs are exempt from tax, the War Pensions Agency has no mechanism to deduct tax and no record of any deductions. There may have been occasional individual problems with regard to tax affecting WDPs but we are aware of none.
We would need to conduct a manual search of current and closed pension files in order to identify the number of Army Service Attributable Pensions (SAP) correctly treated for tax purposes since 1973. The current problem has arisen principally with respect to Service Invaliding Pensions (SIP). It is possible, however, that in a small number of Army cases an error may have arisen for SAPs in those cases where the scheme rules require the SAP to be paid at the SIP rate where the latter is higher. This is because the pension will have been recorded as a SIP within our computer systems and Inland Revenue may have been advised of eligibility for tax on that basis.
The number of SIP cases identified as a result of our review of the some 20,000 relevant live Army pension files, following recognition of the error in 1998, is as set out.
Pre-1973 Post-1973 Totals Pensioners 182 795 977 Widow(er)s 24 2 26 Estates nil nil nil Totals 206 797 1,003 We do not consider it practicable to conduct a search of the very large number of Army pension files where the recipient is now deceased. We are in the process of conducting a sample search of those files dating from the 1940s where we have been able to establish that a SIP might have been in payment and might therefore have been incorrectly taxed. This work should be completed shortly and should provide a clearer perspective on the scope of the problem. It has not so far proved practicable to, similarly, identify 'at risk' cases before this period.
For those cases where the pensioner is deceased, as well as for any other cases where a pensioner or spouse considers that his/her pension was incorrectly taxed, we have invited claims support by basic service identification. We will consider these claims as quickly as possible.
We expect the numbers of outstanding cases where SIPs/SAPs were wrongly taxed to be small as, to qualify for such a pension, personnel had to serve 14 years before 1945, 12 years before 1973 and 5 years before 1988. This would exclude those who only served as conscripts, volunteers or national servicemen, as well as many regulars.