Select Committee on Defence Third Report


(a)    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. 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. (paragraph 14)

(b)    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. (paragraph 17)

(c)    We believe that the MoD has a responsibility to Service personnel which goes beyond that of a normal employer. (paragraph 22)

(d)    We believe that, in conducting the pension review, the MoD has placed too much emphasis on how the pensions system can be used to benefit the Armed Forces as employers, rather than on ensuring there is proper provision in place for Service personnel as employees, and that this has had a negative influence on the proposals it has brought forward. (paragraph 23)

(e)    We believe the MoD has dismissed the possibility of overt contributions to the pension scheme without properly considering it. There would inevitably be obstacles to overcome in introducing such a system, but there is no reason to assume, without first properly examining them, that these would be insuperable. We recommend that the MoD look again at the issue of making the Armed Forces Pension Scheme an overtly contributory scheme. (paragraph 37)

(f)    We are not convinced that the Armed Forces Pension Scheme, even under the proposed new arrangements, could be regarded as generous either by comparison with other public sector schemes, or with what is appropriate to the special status of the Armed Forces. (paragraph 46)

(g)    The net effect of the new pension arrangements is that those who are not killed or injured during their military service are penalised so that the benefits for those who are can be increased to acceptable levels. We welcome the proposed improvements to dependants' and ill health benefits but regard it as unacceptable that these are achieved by reductions in benefits elsewhere in the pension scheme. (paragraph 55)

(h)    We recommend that the MoD follows good practice found elsewhere in pension schemes by offering the option of commutation on retirement, rather than the potentially disadvantageous automatic lump sum. (paragraph 57)

(i)    We believe the MoD needs to look at Immediate Pensions in the broad context of a strategic and flexible approach to financial retention incentives. The MoD needs to justify the cost of the Immediate Pension and demonstrate that it is an appropriate component of a modern pension scheme. (paragraph 63)

(j)    We recommend that the MoD continues to examine options for removing Immediate Pensions from the Armed Forces Pension Scheme and operating them as a separate component of Service pay. The more extensive use of targeted bonuses to improve retention in shortage areas throughout the three Services should be pursued with more imagination and urgency. The net effect of these measures would be that, without the distorting effect of Immediate Pensions, greater resources would be available within the Armed Forces Pension Scheme for full career and other benefits. (paragraph 70)

(k)    We do not believe the MoD's review of the Armed Forces Pension Scheme has been sufficiently thorough. We welcome the improvements proposed in some areas, particularly dependants' and ill health benefits. However, we reject the MoD's view that these should be funded by reductions elsewhere in the Scheme. We challenge the assumption that the Armed Forces have a generous pension scheme. This has led the MoD to limit its options at an early stage by imposing the constraint of cost neutrality on the review process and we fundamentally disagree with this starting point. It has had the effect of stifling innovation in the whole approach to the pensions review, and what has resulted is therefore what the Minister himself described as 'a reshuffling of the pack'. We believe the Armed Forces deserve better than that. (paragraph 71)

(l)    We welcome the assurance that the MoD is willing to look again at restrictive time limits for compensation claims. It is, however, regrettable that the issue of time limits, like many other aspects of the compensation proposals, were not sufficiently developed before the consultation document was published. While we would regard three years as an acceptable period in which to claim for a straightforward injury, it is too short a period for more complicated conditions or those which develop slowly, particularly given that 70 per cent of claims currently fall outside a three year timescale. We recommend that any time limit which the MoD imposes should relate to the date of the injury or the date of diagnosis of the condition. This practice would reflect limitation rules in civil cases. (paragraph 92)

(m)    We find it impossible to accept that the MoD has carried out a proper review of the current compensation arrangements when they have no reliable data to show the scale of problems which they have identified as reasons for change. (paragraph 94)

(n)    We would regard any reduction in the number of successful claims for injuries and illness, which was caused by additional administrative obstacles, as undesirable. There are criteria in place at present which ensure that war pensions are not given away lightly. To impose increased restrictions on claims, in the form of time limits and additional requirements for evidence, without any evidence of current abuse, would be a disservice to the Armed Forces and a very poor reflection of the value which the country places on them. (paragraph 97)

(o)    It is unacceptable that the MoD did not think through the full implications of the tariff proposals at an earlier stage. It is worse that, even at this stage, it cannot decide whether its proposals will include a review mechanism for subsequent deterioration or not. We recommend that the way in which deterioration will be treated under the new proposals should be properly examined and a fully worked-through scheme formulated, before the review decisions are published. (paragraph 102)

(p)    We expect to see the details of mechanisms to prevent abuse of minor injury claims set out in the MoD's final proposals. Until then we remain to be convinced that this proposal should be part of the new arrangements. (paragraph 104)

(q)    The MoD accepts that there are problems for claimants in managing large lump sums. We are pleased that this has been recognised in the proposal for dealing with loss of earnings through a guaranteed income stream rather than a one-off payment. (paragraph 105)

(r)    We are not convinced that the proposed new arrangements for paying compensation for loss of earnings through a guaranteed income stream offer any advantage to injured or sick Service personnel, compared to the present War Pensions Scheme. (paragraph 109)

(s)    We agree that streamlining should not be at the expense of fairness and justness. There are bound to be a great many variables, even in cases which superficially appear to be similar and individuals should not be penalised by a system which is not sufficiently sophisticated to address the specific circumstances of their claim. (paragraph 114)

(t)    We do not believe a new system will function properly unless proper medical advice is available as an integral part of the claims process rather than as an add-on used at the discretion of medically unqualified officials. We recommend that the MoD makes full use of the extensive expertise which the War Pensions (now Veterans') Agency has, to administer any new compensation arrangements which it introduces. It should also look at the way the private sector deals with industrial injuries compensation, to assess whether there are lessons to be drawn from best practice there. (paragraph 115)

(u)    We believe it is irresponsible of the MoD to propose a change of this scale (that ex-Service personnel should in future claim supplements and allowances from the Department for Work and Pensions), without itself knowing the full implications. We would be against any attempt by the MoD to distance itself from responsibility for the health and welfare of former Service personnel who have been injured or made ill as a result of their service or to shift that responsibility on to other government departments as soon as personnel leave the forces. (paragraph 118)

(v)    Those covered by any new compensation arrangements will require the same welfare support as current War Pensioners. It would be a waste of a valuable resource not to make the services of the War Pensioners' Welfare Service available to claimants under the new scheme and we recommend that the MoD ensure that access to the WPWS is provided as part of any new arrangements. (paragraph 119)

(w)    We agree that it is reasonable to compensate individuals for injuries sustained as part of required fitness or sporting activities, including representative sport. (paragraph 120)

(x)    We recommend that Service personnel should continue to receive compensation for injuries sustained during home to duty travel, following the current practice of evaluating each case on its merits. (paragraph 121)

(y)    We welcome the MoD's full compliance with the new arrangements for handling civil negligence cases and the improvements this has brought to the process, for both claimant and defendant. (paragraph 126)

(z)    We would be concerned by any potential for vexatious civil negligence claims against the MoD, but we believe that there can be positive aspects of civil negligence cases for both parties. Every effort should be made to make the process as stress-free and swift as possible, including providing full access to medical records. Comprehensive and accurate information should be provided about all the options available to Service personnel in seeking compensation, including their recourse to the civil courts. (paragraph 128)

(aa)  The net result of the proposed new compensation arrangements would appear to be a significant overall reduction in the MoD's liabilities for ex-Service personnel. This may have been inadvertent, but we do not regard it as desirable. The MoD should be seeking to provide levels of compensation which are appropriate to the commitment which Service personnel make and which reflect the MoD's duty to be a responsible employer. A reduction in expenditure on compensation fulfils neither of these criteria. (paragraph 131)

(bb)  We agree that members of the Reserve Forces should continue to benefit from compensation arrangements which mirror those available to the Regular Forces. (paragraph 132)

(cc)  We welcome the improvements which the new compensation proposals undoubtedly offer in some areas, and the fact that, from the examples provided, it appears that a number of claimants will receive increased levels of compensation compared with the present system, particularly severely disabled claimants. However, we have to assess the new system in the context of how it will affect the Armed Forces generally, as well as in terms of improvements for individual Service personnel. The Minister told us that, as a result of the changes in time limits and burden of proof, there would be fewer successful claims for compensation in the future. The MoD has provided no evidence that the current provision is over-generous. Unless it can do so, the new proposals can only be regarded as an unacceptable diminution in the provision the Armed Forces makes for its employees. (paragraph 133)

(dd)  The issue of unmarried partners is one which the Armed Forces can no longer ignore and which should have been dealt with as part of the original reviews of pension and compensation arrangements. We expect to see appropriate provision included in the final pension and compensation proposals which the MoD brings forward in the autumn. (paragraph 140)

(ee)  We recommend that the MoD take the opportunity provided by introducing new computer systems to adopt best practice and set up user-friendly, interactive websites to help Service personnel understand what benefits they may be entitled to, and to assist them through the process of claiming. This should supplement the more traditional methods of providing information, in the form of accessible and readable leaflets, made available at an appropriate time, and which indicate where further, more detailed information can be obtained. (paragraph 147)


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