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Volume 928: debated on Monday 21 March 1977

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asked the Secretary of State for Defence what is Her Majesty's Government's present policy on the terms of contract of long-serving officers in respect of lump-sum gratuities.

Under the Armed Forces Pension Scheme officers who leave with a minimum of 16 years' service from age 21 receive an immediate pension based on rank and length of service, plus a tax-free lump sum, known as terminal grant, of three times the annual value of the pension. The lump sum accords with normal provision in public service superannuation schemes and will continue. Similar immediate benefits are paid in cases of premature retirement because of illness or injury.Up to 1st April 1975, officers in the Armed Forces pension scheme who left for reasons other than illness or injury before qualifying for immediate pension received a tax-free gratuity in lieu, provided they had served a minimum of 10 years. With effect from that date, preserved pensions and terminal grants payable at age 60 were introduced in accordance with the Social Security Act 1973, for early leavers who had attained the age of 26 and a minimum of five years' service. Officers awarded preserved pensions with at least nine years' reckonable service also became eligible for an immediate tax-free grant to assist with their resettlement needs. As a transitional measure, those leaving before 1st April 1978 with a minimum of 10 years' service may opt to receive the former gratuity in lieu of preserved pension and resettlement grant.