New clause 19 - Full career pension

Part of Armed Forces (Pensions and Compensation) Bill – in a Public Bill Committee at 10:30 am on 26th February 2004.

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Photo of Mr Ivor Caplin Mr Ivor Caplin Parliamentary Under-Secretary, Ministry of Defence 10:30 am, 26th February 2004

I addressed the main purpose of new clause 19 at columns 54 and 55 of the Committee's second sitting, on 10 February. However, let me repeat my four main points, just for clarification. First, the Inland Revenue limit of 66.7 per cent. of salary is a maximum, not a target. Secondly, the limit is likely to disappear from April 2005. Thirdly, few people in the armed forces scheme are affected—the figure is about 10 per cent. of officers and 2 per cent. of other ranks. Fourthly, everyone can make additional voluntary contributions under the new scheme to increase the value of their benefits up to the equivalent of 40 years' service. I shall return to the point raised by my hon. Friend the Member for Falkirk, West (Mr. Joyce) in a moment.

In addition, armed forces personnel can earn pension benefits from the first day of service under the new scheme, as I said on Tuesday. Under the current scheme, the starting age for benefits is 21 for officers and 18 for other ranks. I hope that I am being helpful when I say that the hon. Member for Aldershot is slightly missing the point. Under the new pensions scheme, people will be able buy added years through AVCs to bring the value of their pension up to 66.7 per cent. of their final earnings, which my hon. Friend mentioned, and there is certainly every expectation that they would do that.

I have two final points. I think that the hon. Member for Aldershot suggested that other public service pension schemes had accrual rates of 66.7 per cent. at full career, but I am pretty sure that that is not the case. If my memory serves me correctly, the current civil service scheme—not the new one—does not have a full accrual rate of 66.7 per cent. Perhaps I can check the figures and circulate a list.

Although the current career structures and fitness requirements make it difficult to employ personnel for longer in our armed forces, we have designed the new pension scheme arrangements in recognition of the fact that that may change. Meanwhile, pensions that accrue a lower percentage of final salary than other schemes—the point my hon. Friend the Member for Falkirk, West made so well—are paid at an exceptionally early age. The reality is that most personnel who leave with a full pension at age 55 will be able to take further employment and to build up significant additional benefits. That returns us to our debate on the skills and abilities of members of our armed forces and the transferability—if I can call it that—of those skills to new careers. There is no question that that is a considerable benefit. I hope, therefore, that we will not need to proceed further with new clause 19.