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Armed Forces (Pensions And Compensation) Bill

These notes refer to the Armed Forces (Pensions and Compensation) Bill [Bill 10] as introduced in the House of Commons on 4th December 2003 ARMED FORCES (PENSIONS AND COMPENSATION) BILL EXPLANATORY NOTES INTRODUCTION 1.     These explanatory notes relate to the Armed Forces (Pensions and Compensation) Bill as introduced in the House of Commons on 4 December 2003. They have been prepared by the Ministry of Defence (MoD) in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. 2.     The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given. TERRITORIAL EXTENT 3.     The Bill extends to the whole of the UK. There is no effect on the National Assembly for Wales, and no other particular effect on Wales. SUMMARY 4.     The Bill gives the Secretary of State the power to make a new occupational pension scheme for members of the Armed Forces and to establish a new compensation scheme for members of the Armed Forces, including the Reserve Forces, who are injured, suffer ill-health, or die as a result of their service. The Bill amends the procedure for appeals under the War Pensions Scheme by making provision for a right of appeal from the Pensions Appeal Tribunal to a Social Security Commissioner and then to the higher Courts. It extends those rights of appeal to decisions made under the new compensation scheme. [Bill 10—EN]     53/3 The Bill also makes provision for the property, rights and liabilities of the Royal Patriotic Fund Corporation, a charity which makes grants and allowances in cases of need to the spouses, children and other dependants of members of the Armed Forces, including the Reserve Forces, to be transferred to a new charitable body which will be registered under the Charities Act 1993. BACKGROUND New Armed Forces Pension Scheme and Compensation Scheme 5.     The Armed Forces Pension Scheme (AFPS) and attributable (due to service) compensation arrangements have been reviewed with the aim of developing appropriate provision to meet the needs of the Armed Forces in the 21st century. The schemes were reviewed separately, but were the subject of parallel public consultation which began in March 2001. Details of the schemes are in two MoD framework documents, copies of which have been placed in the libraries of both Houses. 6.     Following this public consultation process, the intention is to replace the current pension provisions for the Armed Forces which are at present governed by the following Acts: The Naval and Marine Pay and Pensions Act 1865 The Pensions and Yeomanry Pay Act 1884 The Air Force (Constitution) Act 1917 The detailed scheme rules are set out in the Naval and Marine Pay and Pensions (Non-Effective Benefits and Family Pensions) Order 2002, the Army Pensions Warrant 1977 and the Queen's Regulations for the Royal Air Force. 7.     New entrants to the Armed Forces will automatically be members of the new pension scheme from the date of introduction, while members of the current AFPS will have the choice either to stay with the existing scheme or to transfer to the new one. 8.     The Bill also gives the Secretary of State power to establish a scheme for payment of benefits on termination of service other than by way of retirement. For example, it would enable the Secretary of State to pay benefits from the point at which Service personnel have served for 18 years or reached age 40, whichever is later. 9.     The present arrangements for providing compensation for ill-health, injury or death due to service in the Armed Forces will be replaced. Currently, provision is made under the War Pensions Scheme, the rules of which are contained in the Naval, Military and Air Forces Etc. (Disablement and Death) Service Pensions Order (S.I. 1983/883) as amended, and also under the attributable benefits of the AFPS, whose legal basis rests in the three Acts listed above. There are also separate arrangements for attributable injuries for Reservists. These current arrangements will be replaced by a single scheme. 10.     The new arrangements will apply to all attributable injuries or illnesses whose causes occur on or after the introduction of the new compensation scheme. In the case of illness and injury sustained prior to this date, the current arrangements will continue to apply. In the case of attributable deaths, where the illness or incident which led to the death (whether immediately or subsequently) occurred after the date of introduction, the new compensation scheme will apply; for all other deaths, the current arrangements remain extant. 11.     This Bill provides enabling powers which allow the Secretary of State to establish new pension and compensation schemes. Clause 1 is modelled on the Superannuation Act 1972 which governs the Principal Civil Service Pension Scheme (PCSPS), the Local Government Pension Scheme, the Teachers' Pension Scheme and the NHS Pension Scheme. As is the case with the other public service schemes, the Bill confers power on the Secretary of State to make and administer pension and compensation schemes, the detailed rules of which are set out in Statutory Instruments. The Statutory Instruments made under the Bill and any amending instruments will be subject to Parliamentary scrutiny under the negative resolution procedure. Appeals: Pensions Appeal Tribunals and the Social Security Commissioners 12.     At present decisions made by the Secretary of State under the War Pensions Scheme may be appealed to the Pensions Appeal Tribunal (PAT) under the Pensions Appeal Tribunals Act 1943. The Act is to be amended to provide for a similar right of appeal in relation to decisions under the new compensation scheme. In addition, in accordance with the recommendations of the Leggatt Review on Tribunals, the path of appeal from decisions of the PAT is to be altered. Currently, there is a right of appeal from the PAT to the High Court with no further right of appeal. Under the new arrangements, an appeal will lie in the first place to a Social Security Commissioner, with a further right of appeal to the higher courts. 13.     Other provisions in the Bill will introduce powers for the set-aside and redetermination of decisions, which will give greater flexibility to the PAT and Commissioners in dealing with appeals.      Royal Patriotic Fund Corporation 14.     The Royal Patriotic Fund Corporation (RPFC) is a charitable body established by the Patriotic Fund Reorganisation Act 1903 to take over the administration of the Patriotic Fund, which was set up by Royal Warrant in 1854 to provide relief to the widows and orphans of soldiers, sailors and marines who died in the Crimean War. The RPFC is a small charity which makes grants and allowances in cases of need to the spouses, children and other dependants of members of the Armed Forces and Reserve Forces. 15.     The constitution of the RPFC is set out in the 1903 Act (with amendments to take account of such developments as the creation of the Royal Air Force) and in various respects no longer accords with modern charitable practice. For some time, it has been apparent that it requires substantial amendment. The normal vehicle for amending a charity's constitution requires an order of the Secretary of State (in practice the Home Secretary) embodying a scheme made by the Charity Commission under section 17 of the Charities Act 1993, but this is not available in this case because the 1903 Act extends throughout the United Kingdom, while the powers under section 17 extend only to England and Wales. For this reason, primary legislation is necessary. 16.     The current legislation is cumbersome, making the operation of the charity difficult and adding to administrative costs. The RPFC wishes to have a modern charitable form and to be able to operate like other similar charities. This Bill repeals the Patriotic Fund Reorganisation Act 1903 under which the RPFC operates, and allows the RPFC to transfer its property to a new charity. These provisions are relevant to the broad intent of the Bill given that the charity provides financial and other assistance to dependents of Service personnel.      COMMENTARY ON CLAUSES Clause 1: Pension and compensation schemes: armed and reserve forces 17.     Subsection (1)(a) of this clause enables the Secretary of State to establish a new occupational pension scheme for members of the regular Armed Forces. The new scheme will provide defined benefits, which will relate to the length of service and final salary (excluding additional pay and allowances) of the individual Serviceman or woman. Subsection (1)(b) allows flexibility to provide money purchase arrangements should this be a desirable or necessary approach for future pension provision. There are no plans at present to introduce a defined contributions scheme. 18.     Subsection (1)(a) also enables the Secretary of State to establish schemes, other than occupational pension schemes, which provide for the payment of benefits on termination of service, for example, for those who leave service before normal pension age. 19.     Subsection (2) enables the Secretary of State to establish a new compensation scheme for members of the Armed Forces and Reserve Forces which will take the place of the War Pensions Scheme and the attributable benefits payable under the AFPS. Clause 2: Payments due from scheme administrator in respect of deceased persons 20.     Where a member of the Armed Forces or Reserve Forces, or former member of the Armed Forces or Reserve Forces, dies and is owed a sum not exceeding £5,000 by way of arrears of pay, pension or other benefits payable in respect of his service the Secretary of State may, by virtue of sections 3 and 5 to 11 of the Navy and Marines (Property of Deceased) Act 1865 and section 4 of the Pensions and Yeomanry Pay Act 1884 (which, for this purpose, also applies to members and former members of the Royal Air Force by virtue of an Order made under the Air Force (Constitution) Act 1917), pay that sum to the person or persons who appear to him to be beneficially entitled to it without the need for them to obtain legal title to the estate (and so incur the costs associated with that procedure). Those provisions will apply to benefits payable under the new pension and compensation schemes. Clause 2 enables those provisions to be applied where the pension or compensation scheme is administered by someone other than the Secretary of State.      Clause 4: Existing Naval and Marine Pensions 21.     The Naval and Marine Pay and Pensions Act 1865 enables provision to be made for payment of pensions to those who have served in the naval or marine forces or to their "widow" or other surviving relatives. The wording of the section would not allow pensions to be paid to unmarried partners. Clause 4 amends the section in a way which would allow the Secretary of State to pay benefits to unmarried partners in respect of attributable deaths. The equivalent provisions relating to the Army and the Royal Air Force (the Pensions and Yeomanry Pay Act 1884 and the Air Force (Constitution) Act 1917) do not require to be amended in this way. Clause 5: Amendments to Pensions Appeal Tribunals Act 1943 22.     Clause 5 gives effect to Schedule 1 to the Bill, which details a number of changes to the Pensions Appeal Tribunals Act 1943. These changes are necessary to provide for a right of appeal to the PAT under the new compensation scheme, to change the path of appeal from the PAT, and to make new arrangements for set-aside and redetermination of appeals. 23.     Schedule 1 paragraph 2 sets out amendments to the Pensions Appeal Tribunals Act 1943 allowing the PAT to hear appeals against decisions by the Secretary of State under the new compensation scheme. The PAT will continue to have jurisdiction to hear appeals under the existing War Pensions Scheme. The existing and new schemes will run concurrently until claims under the old scheme phase out over time. 24.     Schedule 1 paragraph 3 repeals provisions of the Pensions Appeal Tribunal Act 1943 that deal with appeals to the High Court and the set-aside of decisions. Under the existing War Pensions Scheme, the Secretary of State is able to review his own decisions in relation to a claim. Paragraph 3(3) allows for the Secretary of State to review a decision when leave to appeal from PAT has been sought and the case has been referred back to a different Tribunal, or when a direction for rehearing has been given. 25.     Schedule 1 paragraph 4 is inserted to provide for appeals on points of law from decisions of the PAT to the Social Security Commissioners. Appeals to a Commissioner can be initiated by either the initial appellant to PAT, or the Secretary of State for Defence. The following sub-paragraphs explain the additions to the Pensions Appeal Tribunals Act 1943 under section 6. "Section 6A - Appeals From Tribunal to Social Security Commissioner" —     For an appeal to proceed, the appellant must seek permission ('leave') to appeal. Leave can be obtained from the Chairman of the Tribunal, the President/Deputy President of the PAT or a Social Security Commissioner. —     In practice, this will require leave to appeal to be sought first from the chairman of the Tribunal or President/Deputy President of the PAT, then from a Commissioner if leave is refused at the PAT level. —     If both parties to the appeal agree the PAT decision is wrong in law, the Commissioner may set aside the decision and refer it back to PAT with directions for redetermination. The Commissioner's power in this regard is discretionary, as he may disagree with the parties as to the existence of an error in law. —     If, however, the Commissioner decides the decision appealed against is wrong in law it must be set aside. Since appeals are on points of law alone, finding of such an error in law effectively renders the decision invalid. The Commissioner has considerable flexibility in deciding how to deal with a set-aside decision: a)     the Commissioner can give the decision he determines the Tribunal should have given, but for their mistake in law, without requiring fresh or further finding of facts; b)     if expedient, he may make findings of fact and deliver an appropriate decision; or c)     he may refer the case back to the same or different tribunal for redetermination. —     The detailed procedures for making an appeal, and applying for leave to appeal, are to be set out in regulations. When regulations are made, the intent is to mirror, as far as possible, existing provisions under the Social Security Regulations. This will, for example, include matters such as time limits and notice requirements for appeals. —     Section 6A(10) allows for appeals or applications to be transferred between a Northern Ireland and United Kingdom Commissioner (and vice versa) when an appellant has changed their residence after the original appeal to the PAT. "Section 6B - Redetermination etc of appeals by PAT" applies when a party applies to the Chairman (or person who constituted the Tribunal) for leave to appeal to a Commissioner. —     If the Chairman considers the decision is wrong in law, he may set it aside for redetermination by the same or a differently constituted tribunal. This power is discretionary, as the chairman may consider it appropriate for the case to proceed for a Commissioner's deliberation. —     If both parties to the appeal consider the decision is wrong in law, it must be set aside for redetermination by a differently constituted Tribunal. If the appellant wants to avoid this set aside and redetermination at PAT level and for the case to proceed to a Commissioner, he may further apply to the President/Deputy President of PAT or a Commissioner for leave to appeal. "Section 6C - Appeals from Commissioner" —     Decisions of a Commissioner can, in turn, be appealed on a point of law to a higher court. The Court in question depends on where the appellant from PAT is ordinarily resident: the Court of Session for Scotland, the Court of Appeal in Northern Ireland and the Court of Appeal in England/Wales. This recognises the different legal systems of the devolved jurisdictions and the desirability of hearing a case as close to the appellant as possible. —     If circumstances dictate, a Commissioner may also specify that appeal be heard by a Court in a different region from that region by which the appellant was ordinarily resident at the time of appeal. This provides some flexibility in cases where an appellant has shifted residence before the hearing of the appeal itself. —     Regulations will set out the detailed procedure for making appeals to the Courts. An appeal can only proceed with the leave of a Commissioner or of the Court being appealed to. "Section 6D - Procedure in proceedings before Commissioner" —     The intent is for procedures for appeal from the PAT to mirror, so far as possible, those which apply to appeals to the Commissioners from other tribunals. Subsection (1) provides that regulations governing the conduct of appeals from the PAT may make such provision as may be made in regulations under s16 of the Social Security Act, which deals with the procedure for appeals to a Commissioner. Other provisions in this section mirror the existing procedural regulations for the Commissioners. Of particular note are: a)     Section 6D(4) - a Commissioner can call upon experts to help him determine difficult issues of fact. b)     Section 6D(5) - the Chief Commissioner can nominate a tribunal of two or more Commissioners to hear appeals or applications for leave that involve questions of law of special difficulty. 26.     Schedule 1 paragraph 6 inserts Section 11A (Regulations) into the Pensions Appeal Tribunals Act 1943 to give the Lord Chancellor the authority to make regulations governing appeals to a Commissioner and a higher Court, and procedure before the Commissioners. 27.     Schedule 1 paragraph 10(5) provides for the transfer of PAT appeals in cases when the appellant has changed residence. When convenient, a Tribunal seized of an appeal may transfer the appeal to a Tribunal in another part of the United Kingdom. Clause 6: Royal Patriotic Fund Corporation 28.     Clause 6 and Schedule 2 provide for the transfer of the property, rights and liabilities of the RPFC to a transferee in accordance with an order to be made by the Secretary of State (in practice the Home Secretary). They additionally provide for the transfer of employment rights of employees of the RPFC upon their re-employment by its successor and for other matters of an administrative nature. 29.     This part of the Bill therefore enables the Secretary of State to make an order, subject to negative resolution procedure, transferring the property, rights and liabilities of the RPFC to a new charitable vehicle. The transferee of the RPFC's property will be a charity constituted under the law of England and Wales, and will be a registered charity under the Charities Act 1993. The purpose of the charity will not change, and there will be no effect on potential beneficiaries in Scotland or Northern Ireland.      Clause 7: Amendment and repeals 30.     Where a person unlawfully kills another, the general rule is that he should not benefit from the death of that other. In the context of certain social security benefits and pensions, this means that widows' or widowers' benefits will not be payable where the widow or widower has unlawfully killed their spouse. Section 4 of the Forfeiture Act 1982 provides that any question about whether the forfeiture rule is to apply to a claim for certain benefits is to be decided by a Social Security Commissioner. It also provides that the Commissioner may modify the operation of the forfeiture rule. Subsection (1) amends section 4 of the Forfeiture Act 1982, so that its provisions apply to benefits payable under both the new pension scheme and new compensation scheme. Subsection (2) introduces Schedule 3 which repeals the 1903 Act which established the RPFC and associated enactments. It also repeals provisions of the Pensions Appeal Tribunals Act 1943 and related provisions in consequence of the new appeal arrangements introduced by this Bill. Clause 8: Commencement 31.     This clause provides that the provisions of the Act are to come into force on such day as the Secretary of State may by order appoint. It is anticipated that the provisions of the Act relating to the pension and compensation schemes, the provisions relating to appeals under the War Pensions Scheme and the new compensation scheme, and the provisions relating to the RPFC will be brought into force at different times. Clause 10: Orders 32.     Subsection(4) provides for the Statutory Instruments which will set out the details of the schemes (the Armed Forces Pension Scheme and the Armed Forces Compensation Scheme) to be subject to negative resolution. This allows members of both Houses to consider these schemes. FINANCIAL EFFECTS OF THE BILL 33.     The provisions for the new AFPS will be funded through annually managed expenditure at the point of pension benefit delivery, with charges paid by the MoD for future accruing pension liability for current members of the Armed Forces; the current charges amount to an average of 22% of the Service pay bill. The new AFPS is designed to be cost-neutral in comparison with the current scheme. The cost has been revalued to take account of the increased cost of people living longer in retirement, but the financial implications are Government-wide for public service schemes. The long-term pension cost increases are being addressed through the Government`s proposals in its White Paper "Security, Simplicity and Choice", as well as through increased Departmental contributions for future pension liability. The new AFPS structure has been amended to take account of longevity and overall there will not be an increase in costs to the Exchequer because of the introduction of this pension scheme. 34.     The new compensation scheme is broadly cost-neutral when compared with the benefits available under the current compensation arrangements. However, there will be higher costs to the Exchequer in the early years of the new compensation scheme due to the awarding of lump sum payments for pain and suffering (a small number of which at the highest level may be around £280,000). 35.     The Department of Constitutional Affairs has not forecast any increases to public expenditure from changes to the appeals process at this stage. It is hard to forecast how many decisions may be appealed under the new compensation scheme. It is also difficult to predict whether the right of appeal to a Commissioner might attract a higher number of appeals than to the High Court. Any increase in the number of appeals may be offset by the fact that appeals to a Social Security Commissioner tend to incur far lower costs to the Government for each case than appeals to the High Court. It should be noted that appeals from PAT are likely to be a comparatively small proportion of cases before a Commissioner. EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER 36.     The introduction of the new pension and compensation schemes may require additional resources in the short term while the administrative arrangements are established, and there will be a period of parallel manning of both sets of schemes. Nevertheless, the intention is to minimise the impact on staffing numbers and to maximise the benefits of using information technology. At this stage there are no specific staff increases identified, but the extra numbers required are not expected to be large. SUMMARY OF REGULATORY APPRAISAL 37.     The Regulatory Impact Unit in the Cabinet Office is content that a Regulatory Impact Assessment is not needed. EUROPEAN CONVENTION ON HUMAN RIGHTS 38.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The statement has to be made before the second reading. On 27 November 2003, the Secretary of State for Defence made the following statement: In my view the provisions of the Armed Forces (Pensions and Compensation) Bill are compatible with the Convention rights. COMMENCEMENT DATES 39.     The date on which the new compensation arrangements for the Armed Forces and Reserve Forces are planned to come into force will be 6 April 2005 for all Service personnel. The new AFPS is planned to come into force on 6 April 2005 for new entrants and it is planned that from no later than April 2007 the scheme will be available for current Service personnel who choose to transfer to the new scheme. 40.     The amendments to the Pensions Appeal Tribunals Act 1943 will be implemented as soon as possible after the legislation has received Royal Assent. Clause 6 will be commenced once an appropriate transferee has been created.