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"( ) An order as set out under subsection (1) shall provide mechanisms to ensure all personnel that are part of an armed forces pension scheme who are not retained in service after their 55th birthday, but have completed 35 years' service, receive pension benefits based on 66.67% of their final salary."
The noble Lord said: In speaking to Amendment No. 4 I shall not speak to Amendment No. 12, although I prefer it, as it is drafted far better and I wish that I had produced it myself. However, I shall leave it to the noble and gallant Lord, Lord Craig.
The amendment goes to the heart of the Bill. The problem that we have with all aspects of the Bill is that the pension scheme for the Armed Forces is by necessity different to that for other members of the public sector as a result of the different terms of service. Those are imposed on members of the Armed Forces to meet their operational requirements.
It seems unfortunate, however, that one problem with the plans is regarding full career pensions. This is the only public sector scheme that does not offer genuine full career benefits up to the public sector benchmark. There will be legal limits even for those who serve a full career. Only a few people, who either join very young or reach very senior ranks and are allowed to serve beyond the age of 55, can accrue maximum benefits.
The unusually low normal retirement age of 55 will seriously inhibit the opportunities for earning the full career pension through service. Very few service people join young enough or serve long enough to enjoy full career benefits. Extending service length within a low normal retirement age will exacerbate this. It is disingenuous, at best, to structure a scheme in which more than 90 per cent of members are debarred from earning a full career pension without buying additional voluntary contributions.
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The "normal retirement age" is also a misnomer. It is actually the age at which the full career pension is payable. Allowing personnel to remain in the service for thirty-seven and a half years would allow personnel to earn a full career pension at the public sector benchmark and the current limit of the law. That is impossible for the majority constrained by the normal retirement age of 55. The scheme should be altered to allow those who serve a full career to earn full benefits at 66.67 per cent. Options to achieve this include increasing the normal retirement age; increasing the terminal grant; improving the accrual rate; or introducing shared cost AVCs. At 55, the employee has little prospect of earning a second career pension of any comparable value and is therefore uniquely disadvantaged among the public sector.
Having read the Bill, I fear that the Minister will stand up and say, as did the noble Baroness, that he is in resistance mode, as were those in the other place, to the notion behind the amendment. One aspect of the Bill that I find particularly unfair is that those in the sergeant's mess will be hit hardest by the inability to earn a full career pension, especially as they will have difficulty finding employment that will meet their pension contributions and allow them to earn a full career pension. Many of us think that that is unfair. I beg to move.
Lord Craig of Radley: I rise to support Amendment No. 4 but will speak in particular to Amendment No. 12, which stands in my name. At Second Reading, I said that the armed services would be reassured if some key benchmarks for the new scheme were included in the Bill. Despite his opening remarks, I hope that the Minister will consider including some.
This is a very important Bill for the Armed Forces. At present, it is a paving Bill. It is claimed that some skeletal bones are lying on the pavement; but I do not think that there are enough bones and it would be very helpful if there were some benchmarks below which it would not be possible for a future government of either complexion to adjust pensions without resorting to primary legislation. Of course, any government can change any provision of any Bill, but if the pension schemes are to be run largely by statutory instrument, with variations over a very long period, relying on the Bill, it would be extremely helpful and important for the Armed Forces if some benchmarks were included.
I have itemised one example from the pension side and one from the compensation side. There may be others that the Committee may feel are better or more suitable, but I leave that to the Committee. I seek to discover whether the Government will accept that some form of benchmarking, unusual although it may be in a paving Bill, should be included, bearing in mind the uncertainty about pensions throughout the country. There is a lot of concern about future pension provision, and it would be extraordinarily helpful if the Armed Forces could be given some reassurance through an amendment such as Amendment No. 12.
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Lord Astor of Hever: We on this Bench fully support the amendments on full career pensions. The noble and gallant Lord, Lord Craig, said that this is an important Bill for the Armed Forces. I fully agree with that. In the light of that, I hope that the Minister is in a more charitable mood than his colleague. This is the only scheme in the public sector that does not offer full career benefits up to the public sector benchmark or the limits allowed by the law, even for those who serve a full career. As the noble Lord, Lord Redesdale, said, only a few who either join very young or who reach very senior ranks and are therefore allowed to serve beyond 55 can accrue maximum benefits. That is structurally unsound and fails to recognise the serviceman's unique commitment. The employer imposes a 35-year maximum on a career because it requires a younger than usual workforce.
It is physically demanding and arduous to be a member of the Armed Forces. It is therefore right and proper that those services predominantly employ young and fit people; so the unusually low retirement age of 55 is legitimate. But the low retirement age is not a perk of the job. It is not a dispensation to soldiers, sailors and airmen to retire at 55 years-old because they have done such a good job. It principally benefits the Ministry of Defence. The Commons Select Committee on Defence was particularly concerned about those issues:
"The Government is proposing to reduce benefits to Armed Forces personnel on the basis that they will live for longer, without . . . giving them a real opportunity to work for longer within the public service. This is not reasonable".
As the details of the schemes are not in the Bill, the amendment tabled by the noble Lord, Lord Redesdale, is an attempt to ensure that full career benefits are in line with the public sector benchmark; that is, 66.67 per cent. We support the amendment proposed by the noble and gallant Lord, Lord Craig. It would guarantee a full career pension and would also ensure the death-in-service benefit of four times salary, which it is envisaged the new scheme will include. That is an increase from the current one and-a-half times salary and is a welcome improvement for dependants' benefits.
Lord Bramall: I very strongly support Amendments Nos. 4 and 12 for the reasons that have just been stated. I shall support amendments that are still to be discussed, particularly those on the need for a review of non-attributable widows' pensions and compensation issues. Briefly, I have three general points to put to the Minister in order to obtain his reaction. First, the changes and improvements to some benefits, particularly to dependants and in treating all ranks the same, are to be warmly welcomed. The Forces Pension Society and the British Legion, as well as the Ministry of Defence, are to be congratulated for keeping the Whitehall bureaucracy up to the mark. As has already been said, with no one else to fight for them, the Ministry of Defence has a particular responsibility to ensure that the interests and just
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desserts of our unique Armed Forces are properly protected. I am sure that the Minister would agree with that.
I hope that the Minister will agree with my second point. There is still no cause for complacency. The proposals in the framework Bill have taken an inordinately long time to be brought forward. Of course, they are still not in their final form for Parliament. There should still be some sense of shame in the Ministry of Defence: it has allowed the Treasury to commit it to a cost neutrality of the pension scheme, which is purely on the basis and expectation that individuals are likely to live longer, without taking account of the reduction in the number of people who would have pensions paid to them. That has taken place during the past two decades and will affect the future. It is illogical and unfair, and leads to an unnecessary reduction in the overall money that is available to pay benefits.
Indeed, in doing so, the Ministry of Defence has imposed disproportionate constraints on itself as to how much benefits cost rather than looking more generally at what the Armed Forces, with their unique responsibilities and commitments, deserve. As my noble and gallant friend has said, they certainly deserve the best benchmark from the best possible schemes outside. That has allowed the full career pensions to which we have just been referring to fall below the modern good practice benchmark. That is why it is so important that note is taken of these two important amendments tabled by my noble and gallant friend Lord Craig and the noble Lord, Lord Astor of Hever, which is why I so strongly support them.
Thirdly, I urge the Minister to take serious note of these and other amendments. As yet, there has not been much indication that that will happen. Will he ensure that his department goes on fighting with the Treasury in order to concede, in due course, as many as is possible when they are pressed again at a later stage? Otherwise, the country will be showing a marked ingratitude to those who have served it for so long and so well. That will not pass unnoticed.
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