§ Mr. Gerald HowarthTo ask the Secretary of State for Defence whether the formula to be applied to compensation payable to ex-servicemen wrongly taxed on their service attributable pension will provide a return on the income wrongly deducted which is at least equivalent to the return which would have been 33W obtainable had the individual lent the equivalent sum to the Government under the National Savings scheme and received an element of damages; and whether the sum payable will be based on interest compounded (a) annually and (b) semi-annually. [145140]
§ Mr. CaplinThe formula for determining the gross compensation to ex-servicemen whose invaliding pensions were wrongly taxed for more than six years, involves uprating the sum owed by the Retail Prices Index plus 2 per cent. per annum. The sum payable is to be based on compounding annually. Over the last 20 years this provides a slightly lower return on average than applying the National Savings rate (based on a deposit of £10,000). However, in the preceding decade the Ministry of Defence's formula gives the higher return. Over the whole 30 years, the return using MOD's formula is slightly more generous than one linked to the National Savings rate.