§ The Parliamentary Under-Secretary of State for Defence (Mr. Ivor Caplin)Further to my answer to the hon. Member for Aldershot (Mr Howarth),Official Report, 21 January 2004, column 1244W, the proposals set out in the Treasury and Inland Revenue document Simplifying the taxation of pensions: the Government's proposals", published on 10 December 2003, would allow all such pension guarantee lump sum payments to continue to be paid free of income tax, subject to the proposed £1.4 million lifetime allowance.
The original answer was incorrect following advice from officials across Government, and I unreservedly apologise for this inaccurate answer.
The new armed forces pension scheme currently in Committee stage will in the event of the member's death, be able to pay both death-in-service lump sums of the type already paid under existing pension arrangements and the new pension guarantee lump sums applicable in cases of death in retirement, without any income tax charge. So, subject to the £1.4 million allowance, the rate will not be 35 per cent. but zero.
I have today written to the hon. Member for Aldershot enclosing a copy of this statement.