Armed Forces (Pensions and Compensation) Bill

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Mr. Caplin: For a moment, I expected an influx of comments from Opposition Members. It might help if I explain the purpose of the clause before dealing with the amendment. That may sound a strange way of doing things, but I hope that it will help the Committee.

This is a standard clause, designed to protect the interests of current members of the pension scheme from any changes to its rules that may have an adverse impact on their accrued rights. I assure the Committee that I do not foresee any circumstances in which the Ministry of Defence would want to change the conditions of the scheme retrospectively to take away current members' accrued rights, thus leaving them worse off. The clause should reassure hon. Members that if we ever wanted to do that, we would have to obtain the consent of scheme members.

It is worth explaining that in the context of other legislation. Section 67 of the Pensions Act 1995—I do not suggest that the hon. Gentleman has it at his fingertips—protects members of private sector occupational pension schemes from modifications to the scheme rules that would adversely affect their accrued rights. There is similar provision for public service schemes in the legislation governing those schemes, but the armed forces do not have that express statutory protection. The clause is intended to confer that protection on the armed forces pension scheme and is based on the model in section 67 of the 1995 Act. I hope that that is clear.

Mr. Howarth: At least that is an explanation. The Minister says that the clause is designed to protect scheme members from the diminution of their entitlements. The existing scheme will be subject to reduced benefits by virtue of it being succeeded by the new scheme, in which the benefits will be comparatively less favourable. As for choice, I suppose the Minister will say that members need not be consulted about that modification because they will ultimately be able to choose. However, if the new scheme is subsequently amended in a way that would adversely affect scheme members, there would be a requirement to modify. I put it to the Minister that, under my understanding of the procedure that I tried

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to explain, the legislation simply leads us back to clause 1, which states:

''The Secretary of State may by order establish schemes''.

We are back to square one. If individuals refuse consent in accordance with clause 3(1)(a), the Secretary of State can modify the scheme ''in the prescribed manner'', which means exercising the absolute power that he would have under clause 1. In that way, he can circumvent any opposition that there might be to changes, if consent is withheld, by applying the consultation requirements in clause 3(1)(a).

Mr. Caplin: Not according to the statutory basis that I outlined in relation to clause 3. I cannot imagine a Government, and certainly not a Labour Government, deciding at a later stage to go from death-in-service benefits of, say, four times a member's salary to three times. The hon. Gentleman used that example earlier. The statutory protection will ensure that scheme members have a right of say in the reduced benefits.

Amendment No. 7 is the key amendment. It cherry-picks the best of both worlds—a bit from that scheme, a bit from this. That is how the hon. Gentleman described it. If we were to make that system available, we would increase the costs of the scheme considerably. I am prepared to consider the costs of doing that. It might be an interesting study in terms of public spending analysis. Conservative Members might not want me to do that, but perhaps we should have a look at how much they propose to spend. I do not include the hon. Member for Hereford in that because I already know about the problems with his public spending proposals and everything else. I do not want to take that line because there are other hon. Members who rightly wish to debate that on the Floor of the House.

I cannot understand how we can pick and mix by choosing bits of different schemes and allowing people to transfer between them. That would be wholly unreasonable and not fair or proper because new entrants would not benefit from that choice. Indeed, that is not a real choice. People who come into our armed forces in April 2005 will be members of the new scheme. Existing members have the choice, on an individual basis, to transfer into the new scheme.

In conclusion—we are all getting our retaliation in quickly, Mr. O'Brien—the hon. Gentleman mentioned two years. I accept that we are looking at a two-year window. We have not finalised the precise timing because it partly depends on the ability of the Armed Forces Personnel Administration Agency's IT system to produce the pension benefit statements needed to allow service personnel to make that informed decision. We will return to transition issues, but I thought it useful to mention that now.

We anticipate that the statements will show respectable benefits under both schemes for existing members. The transfer arrangements are rightly being developed with the Government's actuarial department. We intend to lay the details of those scheme rules in a statutory instrument, as I said. On that basis, I hope that the hon. Gentleman withdraws

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his amendment because it is not necessary. I also hope he will accept that I have undertaken to bring the armed forces pension scheme into line with other pension schemes, both public and private, in relation to the protection that armed forces personnel should have under the Pensions Act 1995.

5 pm

Mr. Howarth: The Committee would entirely welcome the Minister's costing the mix and match proposals, if that is what he is offering to do. It would be an interesting exercise. I do not know how one could do it—there are looks of horror on certain faces in the Room because the result could depend on how it was done—but perhaps the Minister and his actuarial advisers could have a stab at seeing how much it might cost to have mix and match proposals.

The amendments are probing. We accept the framework within which the Government are operating. It is cost-neutral, as I said, and I shall revisit that point when we discuss some technical issues. I am prepared to withdraw the amendment, but I want to study what the Minister said about the clause, for which there is no explanatory note, and seek professional advice. Does the hon. Member for Cleethorpes have advice from the Library? I am willing to be assisted if the hon. Lady wants to do so.

Shona McIsaac: The Library note gives a brief explanation of the clause. I am sure that the hon. Gentleman has that note in the same way as I had my copy of the Bill when he referred to it earlier.

Mr. Howarth: I am grateful for that constructive contribution. I relish enormously the prospect of spending the half-term recess studying the Library's brief on the clause.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Clause 4

Existing naval and marine pensions

Question proposed, That the clause stand part of the Bill.

Mr. Caplin: I have worked out a system to ensure that I can introduce the clause.

The clause amends the Naval and Marine Pay and Pensions Act 1865, to which the hon. Member for Aldershot referred in his opening remarks last Tuesday. It will allow the payment of benefits due to unmarried partners in the event of death in service of naval personnel under the current armed forces pension scheme. It is important to emphasise that the Acts covering the other two services do not need similar amendment. The clause relates specifically to the Navy.

The new pension scheme treats unmarried partners in a substantial relationship in the same way as married couples are treated. That relationship is judged according to a clear set of criteria that I gave to the Select Committee in December in an annexe to a memorandum that I sent to it. The extension of benefits to unmarried partners was introduced on an

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ex gratia basis for conflict-related deaths at the start of the most recent Gulf conflict. When work was started on amending the prerogative instruments to formalise this provision in the scheme rules, we found that the primary legislation underpinning the payments of naval pensions did not allow payments to unmarried partners. The clause amends the relevant Act to allow for such payments.

Mr. Robathan: I oppose the clause on three grounds. I suspect that I will not have much support from Government Members, but I do have the support of the Prime Minister, the previous Home Secretary and the current Home Secretary, who all believe that the institution of marriage is special and needs to be safeguarded. The clause does not safeguard the institution of marriage. I happen to think that if people wish to make provision for their unmarried partners they marry them, but I do not expect to have a lot of support from the other side of the Committee in these politically correct days. When I served in the armed forces, people were entirely clear as to what would happen if they did or did not get married, and if they did not that was up to them.

The second point may have greater resonance both with people in this Committee Room and with those who are serving. This Bill is a cost-neutral measure. No extra money is being made available, but we are talking about spending money on people who would not otherwise have it, so current would-be beneficiaries of the scheme will suffer. Perhaps the Minister will address that.

The third point has resonance with the Select Committee, which identified that there were serious legal problems. I have read the Ministry of Defence's criteria, and I can say with almost absolute certainty that there will be legal challenges to them in future—whether from ex-girlfriends or ex-wives, or whomever—because money is involved, and people always want money. This is a legal nightmare and a minefield. There is talk of nominations, but the rules need to be absolutely clear before we pass this; otherwise, defending these actions will be an enormous cost to the Ministry of Defence, and I would rather see that money spent on the pensions and the pay of serving members of the armed forces than on making extremely rich lawyers richer.

©Parliamentary Copyright 2004	Prepared 10 February 2004