The House will be aware that my predecessor made a written statement on 11 July 2006 about the discovery of an error affecting about 1,800 armed forces invaliding pensions. My predecessor advised that he would put in place a new project named "Project Collins" to identify and correct the pension awards, with the payment of any interest due, and consider whether additional recompense is appropriate.

Project Collins is under way and back payments have been made and I can now advise that I have approved the level of interest and compensation package as follows:

For errors under one year, the MOD will not pay interest or compensation.

For errors made between one and six years, the MOD will pay interest at an equivalent amount to that which would have been achieved if the money owed had been deposited in an account paying simple interest, as laid down in Government Accounting. The interest rates are HM Revenue and Customs' repayment supplement rates.

For errors made over six years, the MOD will calculate compensation as though the money had been deposited in an account bearing compound interest at the rate of growth of the Retail Price Index (RPI) plus 2 per cent. per annum.