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Pensions

Volume 451: debated on Tuesday 7 November 2006

To ask the Secretary of State for Defence what representations he has received on extending the widow's and widower's pension under the armed forces pension scheme to post-retirement marriages; and if he will make a statement. (84882)

Ex-service and widows' groups continue to campaign to make retrospective certain pension improvements that have been made since they left the armed forces. One such improvement is in respect of the change in 1978 to the requirement for a widow/widower to have been married to the ex-serviceman or woman during their service in order to receive certain benefits.

Successive Governments have considered retrospective changes to public sector pension schemes to be unaffordable. For this reason, the Government opposed the amendments.

To ask the Secretary of State for Defence what estimate he has made of the annual revenue yield from the introduction of an employee pension contribution of 6 per cent. of pay for all members of the armed forces; and if he will make a statement. (93540)

The armed forces pension schemes are final salary based, non-contributory, contracted-out occupational pension schemes open to most members of the armed forces. The MOD does, however, make a substantial contribution into the schemes each year for current members, currently the overall contribution equates to 24.8 per cent. of the armed forces pay bill.

The non-contributory nature of the schemes was last reviewed as part of the major overhaul of the schemes which were introduced through the Armed Forces (Pensions and Compensation) Act 2004. The Government decided against an employee's contribution at that time because of the complexity of introducing a contributory scheme alongside a non contributory scheme, the administrative complexity and the cost of the change, the impact on personnel of issuing different rates of pay for the same job and the effect on morale, recruitment and retention (HC1155 dated 25 July 2002). The changes made as a result of the review addressed the matter of long term affordability, such as increases in longevity, by rebalancing the provision to take account of modern pension practices and legislative change, and by changing the preserved pension ages.

The Armed Forces Pay Review Body, in their recommendations on the total remuneration package for the armed forces, makes an adjustment to comparator earnings figures to take account of the higher relative value of the armed forces pension scheme benefits against that of pension schemes of comparator private sector organisations. The non-contributory nature of the scheme is one of the factors taken in to account. The level of the adjustment made is currently 7 per cent.

The MOD has not previously made an estimate of the annual revenue yield from introducing an employee contribution of 6 per cent. Taking the armed forces pay bill for 2005-06 as a basis for the calculation, a 6 per cent. employee contribution would equate to £342 million.