Select Committee on Defence Third Report


8. Recommendations for significant changes to the Armed Forces Pension Scheme were made in an independent review of Armed Forces manpower, career and remuneration structures, chaired by Sir Michael Bett in 1995, but were not implemented at the time.[9] After the 1997 election, the new Government announced, during the Strategic Defence Review, that there would be a fresh review of the Armed Forces Pension Scheme.[10] The process started in the autumn of 1998 with the intention that it would take about a year. A parallel review of compensation arrangements was conducted with the then Department of Social Security. In March 2000, the then Minister for the Armed Forces told the House that the pension review would report during the summer,[11] but by July there was no firm date for publishing the outcome.[12] Our predecessors said in their report on personnel issues in February last year that the review had gone on 'quite long enough' and that they expected the findings to be published before the Government replied to that report.[13]

9. The two consultation documents were finally published in March 2001. The original deadline for responses to the consultation process was the end of July 2001. The MoD's intention was to analyse responses during August and September, and to publish this analysis last autumn.[14] In September, the MoD informed us that, although the formal consultation period had ended, certain groups were being given extra time to comment and that an assessment of all the responses would take up to three months, to give time for officials to go back to organisations and individuals for further discussions. In November, the Minister told us that the impact of this protracted consultation period meant that the MoD did not envisage a formal response or proposals to Ministers emerging until 'late spring' 2002.[15] But that revised timetable has in turn proved unachievable: the MoD has since told us that further work is being carried out on a number of specific issues and that less progress has been made with these than they had hoped.

10. As a result of the delays, the MoD will not meet the May target it set itself for circulating revised recommendations to Cabinet and this is not now expected to take place until the autumn. The MoD believes that these delays will not prejudice the planned implementation date for the new schemes, which was scheduled for 2004-05.[16] However, implementation relies on the necessary information technology structures being in place. The MoD told us in oral evidence that 'it is a bit difficult to be too positive about time-scales' for the IT project at the moment and that: 'the likelihood is it will be not before 2004 and well into 2005 before we begin to see the play-out of this'.[17] A subsequent reply to a Parliamentary question indicated that the implementation date for the two new schemes has shifted to 'around 2005-06'.[18]

11. As part of its extended consultation, the MoD is re-examining a number of major areas of the original proposals and on some issues it expects to make substantial changes to its proposals. Amongst the areas which are being reconsidered, on pensions, are:

the precise point for Immediate Pensions to meet recruitment and retention needs

pensionability of specialist pay

benefits for unmarried partners

bonus schemes

the possibility of introducing a contributory element to the pension scheme

the scope for improving benefits to those serving a full career

the appeals process.

and on compensation:

time limits for making claims

the basis and level of pain and suffering awards

handling deterioration

the balance between lump sum and income stream payments

scheme administration and independence

12. These are all fundamental elements of the new proposals. To be examining them at this stage of the process suggests that the reviews were not carried out with proper rigour during the three years it took to produce the consultation documents. The Forces Pension Society believed that the pensions proposals were 'not thought through and certainly not thought through in sufficient depth or breadth about other options'.[19] The response of both the British Limbless Ex-Service Man's Association (BLESMA) and the Confederation of British Service and Ex-Service Organisations (COBSEO) was that the review proposals were significantly flawed and failed to recognise the unique commitment of service men and women.[20]

13. We asked the Minister whether he believed the pension and compensation proposals were adequately developed before the consultation documents were published last March. He told us—

... we have tried to identify as best we could all the areas and the framework within which we were seeking to develop the new structure. Of itself, that then generates the inputs from the concerned organisations and bodies who are out there. If we had answered all the questions then I think, probably, it would have been the first time in pension history that any government department would have got a pension strategy correct from day one; this is a very complex area, no matter which department is dealing with it. It is important that we do get that discourse with the wider community. My view on this would be that the broad reach of what we sought to do identified the issues we were seeking answers on, and was broadly correct—and stimulated and anticipated debate.[21]

We accept that these are complex issues and that major reappraisals of this kind are time-consuming. It is vital that any new schemes which are introduced are sufficiently robust to last into the future and to deal with changing circumstances. However, we are not convinced that the initial reviews were as thorough as they should have been or that the full implications of the proposals had been considered before the consultation documents were published. The evaluation of other options and thinking through of consequences of specific changes should not be happening at this stage of the process.

14. We welcome the MoD's decision to examine pension and compensation arrangements and regard both reviews as timely and appropriate. However, we found both consultation documents to be woefully lacking in detail; the compensation one is particularly weak. It is only in response to our own long list of questions that the detailed information needed to assess the new proposals has emerged from the MoD, and been put in the public domain.[22] Those who wished to respond to the consultation exercises were disadvantaged by the lack of detailed information, which should have been provided at an earlier stage.

15. It is interesting to compare the review of Armed Forces pension arrangements with the recent review of the Principal Civil Service Pension Scheme (PCSPS), given that this is the pension scheme to which most of the Ministry of Defence's civilian employees belong. Preliminary discussions about a new Civil Service pension scheme began in late 1997. Staff consultation by questionnaire took place during the winter of 1998-99. Decisions about the key features of the scheme were taken in April 2000 and a leaflet announcing the changes was issued to all staff in the summer of 2000. Further information was provided to staff over the course of the next year. The current scheme will close to new entrants in October this year and the new scheme will be introduced. Existing members will have the choice of remaining in the old scheme; joining the new scheme and converting years in the current scheme to the new scheme; or retaining their existing benefits for past service in the old scheme and joining the new scheme for future service. Personal forecasts to assist individuals in deciding what is best for the them are being provided in a rolling programme which began in January and will continue until the end of March 2003.[23] We discuss later some of the benefits offered by the new PCSPS compared with the proposals for the Armed Forces. The comparison in the two review processes, however, is stark. It has taken five year from start to finish to finalise plans and introduce a new scheme for the Civil Service. The Armed Forces review began at a similar time and is still a long way from conclusion, with the planned implementation pushed back to 2005-06—seven or eight years after the reviews started.

16. It is clear that the original timetable for the reviews was unrealistic and indeed the Minister admitted that the MoD had 'underestimated the complexity of the issues involved'.[24] It is not just that the time which the whole process will have taken is too long, but also that deadlines for decisions have so frequently been changed. This is bad practice for any government department; it is unfair to those who have made an effort to respond to the original deadline, and on those who will be affected by the proposals. It gives the impression that the MoD places a low priority on these matters, and that inadequate resources have been devoted to them.

17. The new pension and compensation schemes which eventually emerge from this process must provide appropriate provision for Armed Forces personnel and should be an improvement on the current arrangements, otherwise there is no point in the exercise. If delay is an inevitable part of this process then we must accept that, in preference to half-baked ideas being adopted in order to meet artificially imposed timescales. However, the MoD has performed poorly in both the time it has taken to produce its proposals and the rigour with which the evaluation has been conducted. We are concerned that this sends a negative message to current and former Service personnel about the value which is placed on them by the Government.

18. The Minister suggested during his oral evidence that it would have been helpful to the review process if we had begun our inquiry sooner.[25] We find this strange: when we invited him to give evidence last November, he indicated that it would be difficult, given the need for additional work on the proposals, for him to do this before the summer recess and said 'it may be safer for you to plan on a later date, perhaps immediately after the summer recess'.[26] We wished to report our views on the proposals to the House before decisions were taken, and believed the Minister's views would form a crucial part of our work. On this basis, he agreed to give evidence in March. The changes which we have had to make to our timetable for this inquiry have arisen solely from the delays in the MoD's review process. It is wrong of the MoD to try to put the blame on others for their own failure to meet the deadlines which they have set.


9   Independent Review of the Armed Forces' Manpower, Career and Remuneration Structures: Managing People in Tomorrow's Armed Forces, Report to the Secretary of State for Defence, 1995 Back

10   Strategic Defence Review Supporting Essay 9, paragraph 56 Back

11   HC Deb, 22 March 2000, c 567w Back

12   HC Deb, 3 July 2000, cc 57-58w Back

13   HC 29-I, Session 2000-01, op cit, paragraph 160 Back

14   See Armed Forces Pension Scheme Review Consultation Document, paragraph 7.2; and the Foreword to the Joint Compensation Review Consultation Document Back

15   Ev 110-111 Back

16   Ev 37 Back

17   QQ 128, 134; see also Ev 113 Back

18   HC Deb, 19 March 2002, c 209w Back

19   Q 64 Back

20   Ev 79 and 93 Back

21   Q 129 Back

22   See Ev 37-58 and 113-139 Back

23   Ev 111-112 Back

24   Ev 111 Back

25   Q 234 Back

26   Ev 111 Back

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