Select Committee on Defence Minutes of Evidence


Examination of Witnesses (Questions 20-39)

MR IVOR CAPLIN AND MR JONATHAN IREMONGER

5 NOVEMBER 2003

  Q20  Rachel Squire: On the new scheme, even those who serve on to the early departure point aged 40, very few will have the chance to accrue the full career pension within the Armed forces. Will that be the case?[5]

  Mr Caplin: With one caveat. We are still working on some interesting models that I would like to share with the Committee at some stage. That work is not complete at the present time. That may help.

  Mr Iremonger: It is true that most people who get to 40 at the moment do not go on to serve a full career to 55, but most of those do not serve a full career because they choose not to. There are very few people in that gap who are made redundant, so it is their choice rather than our choice. One of the problems we have is the immediate pension as it currently is so attractive for people in that interim period that more people than we would like are leaving, which is why we see an interest in making it slightly less attractive.

  Q21  Rachel Squire: Which links into the fact that under the new scheme the benefits provided to those leaving the scheme before the age of 40 will be less generous than they are under the present scheme.

  Mr Iremonger: No. The benefits for people leaving before 40 at the moment in the new scheme will be fundamentally the same, though it does depend a bit where you are in the sense that a final salary pension may be to the advantage of some people and not to others. Beyond that, the only other major difference is we have brought forward the age at which you can earn a pension. At the moment, you have to be 18 as another rank or 21 as an officer. You can come in at 16 or 17 in the future scheme and earn from that date. I do not think it is true that for people below 40 the new scheme is less attractive. It does depend on your circumstances a bit but in a significant number of cases it will be more attractive.

  Q22  Rachel Squire: Overall you think it will assist retention?

  Mr Iremonger: Definitely.

  Mr Caplin: We would not be doing this if we did not think it would assist recruitment. We will obviously look at the demographics for the years ahead and that is a very important part of the work we have been doing. It will, secondly, aid our retention. I have already on two occasions made clear this afternoon how important retention of members of the Armed forces is, particularly during those years that you have raised.

  Q23  Mr Jones: Can I turn to the issue of unmarried partners? We were surprised that it was not included in the original review, even though across Whitehall and in the industry the issue has been addressed. I understand that the Iraq war has forced the government's hand in now accepting that unmarried partners where death is attributed in service will take immediate effect. I wonder if I could turn to the issue of cost? You have talked about the scheme being cost neutral. First of all, what is going to be the cost of extending to unmarried partners and is it going to be an added cost to the MoD?

  Mr Caplin: The unmarried partners provisions that we are proposing in the new pension scheme is nothing to do with any short term issues that may or may not have arisen. This has been part of the planning process that we have been undertaking—

  Q24  Mr Jones: It was not even in the original review.

  Mr Caplin: Forgive me; I am just going to come to that. It was not in the original consultation document but since the consultation process, which has now been going on since 2001, has been underway, talking to both current members of the Armed forces and ex-service groups, I have come to the conclusion that we should extend the scheme to include unmarried partners, in particular relation to the government's excellent equality agenda. I think it is very important that the Armed forces pension scheme should fit in with that equality agenda.

  Q25  Mr Jones: How do you explain that the original review did not have it in; yet I think I negotiated in industry the first unmarried partners' pension something like ten years ago? I also understand that the Civil Service scheme also addressed this issue. Why did it not get included in the first place if we are committed as a government, as the MoD is, to equality?

  Mr Caplin: You will forgive me but I have been in post since 13 June and—

  Q26  Mr Hancock: Since when has that been an excuse?

  Mr Caplin: I have picked up this ball as the Chairman, before he rushed to New York, made clear. Of course I have had the chance to look at some of the papers, to consider the consultation processes that have been undergone, to discuss with officials how we should go forward and of course to discuss with other parts of government. I am quite happy to tell you that I came to the conclusion that it would be absolutely incompatible with the government's wider equality agenda not to include unmarried partners. On the cost issue, it is difficult to judge. You will understand that I am having to caveat some of these answers because we genuinely do not know, but we think in the region of £16 million.[6]

  Q27  Mr Viggers: Borne by whom?

  Mr Caplin: That is borne by the scheme as a whole. There are changes to all the arrangements here. There are benefits that are improved like widows, 25% higher or four times death in service and unmarried partners. As I explained earlier, that is borne by other changes we have made to the scheme—in particular, the early departure scheme.

  Q28  Mr Jones: Could you explain the criteria to define unmarried partners in terms of a registered partnership or substantial relationship because this was an issue which, last time we took evidence, the MoD were quite vague about. You must have a clear definition if you have been able to put a cost on it.

  Mr Caplin: I can reassure you that probably we do not have a clear definition, but I am very clear about the fact that we will, in terms of pension policy, be following best practice in the Civil Service scheme and the private sector schemes, inviting people to nominate the partner they wish to gain the benefits. That is a standard practice in the private sector.[7]

  Q29  Mr Jones: It is but in this case I find it remarkable that you can tell us it will cost £16 million but you cannot tell us what the definition is going to be. Surely you have to define what is a partnership first before you can estimate what the numbers will be?

  Mr Caplin: We know that only around 50% of our Armed forces are married. That is a figure given to me by the Families Association. We do have some idea of numbers in the 205,000 people in the Armed forces today. We are talking about the future. The relationship issue has come out on occasions during recent conflicts and we have had to take decisions on recent cases in relation to that. We have looked at that relationship issue. As we go through the legislative process, I have no doubt that we will come back to this issue and we will need to deal with it. There are ways of dealing with it in terms of pension policy that we need to look at—in particular in the private sector.

  Q30  Mr Jones: That does not answer my question. I still do not see how you can make an estimate of what it is going to cost if you have not defined what it is going to be. You say 50% are married but what about the other 50%? You could have people who are cohabiting who are heterosexual, homosexual, widows, individuals on their own, people who are in relationships for short periods of time. Surely it is going to be important to define the criteria before you can give me the figure of £16 million or, secondly, say that it is going to be met within the budget. The thing that strikes me is, if it is going to be met from the budget and you come up with a definition which makes it more expensive, surely you have to cut benefits somewhere else in the scheme?

  Mr Caplin: No. When I used the figure, I added the caveat that we are still at the planning stage in some respects. We have not published the Bill yet. We have given you a lot of information as a select committee. We will come to some of these issues during the process but in terms of partners and relationships we have already used a substantial relationship test when we have had to prior to this scheme. We will be looking at best practice in the public and private sector, including dare I say it our own parliamentary scheme. We will look at the best way to ensure that this policy is taken forward. I do not think it is going to be that much more expensive than I indicated.

  Q31  Mr Jones: You do not know. What I still find remarkable, even at this late stage, is that you have not looked at the Australian defence forces scheme which defines registered partners. This policy seems to have the gestation period of an African elephant. It seems to be longer and longer. The MoD seems to be trying to reinvent the wheel rather than look at best practice that is happening elsewhere—for example, in the Civil Service scheme. It is an issue which would be of concern to existing pensioners if this is going to be costing more than the £16 million. If the cost is not going to be borne by extra money from the MoD, it is going to be borne by people in the scheme which will mean that at some time benefits will have to be taken elsewhere. You have already said that because you are in this cost neutral straitjacket you are having to rob Peter to pay Paul at different times throughout the scheme.

  Mr Caplin: We have looked at some of the schemes you have raised there. We are not doing this in isolation; we are not reinventing the wheel. We are also aware that there are discussions across government about civil registration which could also play a part in these particular issues. It is in our interests in terms of the Armed forces to make sure that we reflect a modern armed force which reflects both the culture and nature of the United Kingdom. That is one of the responsibilities that I and ministerial colleagues have. We are determined to do that. The issue of relationships is not about the gestation of an African elephant.

  Q32  Mr Jones: I was talking about the time and method which the MoD has taken to develop this policy.

  Mr Caplin: In the classic TV series, I am saved by the bell. I can only come to you today and reflect on the work that has been undergone since I took post. I am pretty clear in my own mind that we have to have an Armed Forces pension scheme which reflects Britain today. That includes unmarried partners. I take your point about all the possible unmarried partners that covers. Let me reassure you and the Committee that I am including everyone in that category.

The Committee suspended from 3.48pm to 4pm for a division in the House

  Q33  Mr Hancock: Could I ask a supplementary on the unmarried, if I may? I was curious that you took a lot of credit for saying that you have responded to the magnificent government initiative, but this Committee had a pretty effective initiative when we were pushing for this 18 months, two years ago. We were unanimous in our feeling that you had to address this issue. I ask you, Minister, whether you have read the MoD response to our Committee's report, which was in May of last year? The MoD said this in the reply to us: ". . . understands the importance of defining clear, unambiguous entitlement criteria", and here we are, 18 months on, (and that was specifically on the topic of unmarried partner benefits) and you have not even followed the response that you have given the Committee.

  Mr Caplin: Chairman, I disagree with that.

  Q34  Mr Hancock: What, with your response?

  Mr Caplin: No, I disagree with your assessment of it. We have actually moved on quite significantly from there. We have moved on in terms of unmarried partners generally, we are now moving on in terms of the pension scheme significantly and we are making significant progress. I think it was paragraph 140 of your 9 May report where you actually raised this, and I accept that that was the unanimous issue that was raised over a year ago. That has formed an important part of the consultation process. I do come back to the fact that there has been roughly a two-year consultation process. We are now at a point where I very much hope we will be able to seek the legislative time for this Bill in the next session, and at that stage we will be able to deal with many of these issues. I am well aware of what the Select Committee has said, but I think we have made significant progress on unmarried partners in the Ministry of Defence.

  Q35  Mr Hancock: Minister, this was what the MoD said. You said, the MoD, not since June but since May last year, that you understand the importance of defining clear, unambiguous entitlement criteria for unmarried partners benefit. That was as a direct response to the request that we made for this to be dealt with and for the potential beneficiaries and the members of the pension fund to be told, as early as possible, if you were going to accept this, what those criteria would be. Today you cannot even say whether it was a week, a month, six months, or whether or not it was to registered next-of-kin.

  Mr Caplin: We are looking at all of those issues and we continue to do so, because in that intervening period that you have raised, the 18 months, this is also a matter that is across government in terms of civil registrations, and we are looking very carefully at how we might make sure that this pension scheme and the relationships that we are referring to actually fits in across the whole of government.

  Mr Hancock: Armed Forces pensions have never fitted in across government.

  Rachel Squire: I know Mr Viggers and Mr Howarth want to come in very briefly on this issue, and then I am anxious we move on to try and address some other areas as well.

  Q36  Mr Viggers: Minister, you have just said that about half the members of the Armed Forces are married, the actual numbers being: Army, 46%; RAF 53%; Navy 44%. So roughly half are married. The scheme is intended to be cost-neutral and you are extending the benefits of the scheme to a whole new range of people, the unmarried—same sex or different sex. It therefore follows, as night follows day, that if a new group of people are being advantaged then married people must be disadvantaged. That is irrefutable. Would it not be fair for the Government itself to fund this whole new range of benefits rather than expect married service personnel to fund it?

  Mr Caplin: The issue is pretty clear to me. We are talking about the pension scheme from 2005. That is the scheme that we are discussing and debating legislating. The current scheme will continue to operate and it is the new scheme that I have been talking about this afternoon.

  Mr Howarth: Can I say, Minister, that Mr Jones, I think, made some very pertinent points and I think it is amazing that the Department—and I do not blame you, you have only just come in post—has not come up with a definition yet. I am afraid I am frightfully old-fashioned and hugely politically incorrect, but as far as I am concerned evidence of an enduring relationship is on your finger and mine, Minister, and it is called a wedding ring. It seems to me that is the best test of all and it is a shame we cannot stick to that. Can I put to you some concerns which have been expressed by the Forces Pension Society, because they draw attention to the anomaly which will arise as far as widows are concerned? They have suggested to us that the unmarried partner, possibly of the same sex—and you might like to comment on that—in the new scheme will retain their pension for life regardless of how many subsequent partnerships they may care to form. As the Society says, this is clearly bizarre and is a case of reverse discrimination. Do you have a view on that?

  Rachel Squire: Just before you come in on that, I know Mr Crausby is keen to come in on the area of widows. Is there anything you want to add before the Minister answers that question?

  Mr Crausby: I think it has been pretty well covered by Mr Howarth's question.

  Q37  Rachel Squire: There is a clear consensus here and a real concern about the less generous benefits that some widows, in particular, are entitled to, in comparison to these new proposed arrangements for unmarried partners.

  Mr Caplin: I understand what you are saying, Chairman. Maybe I could come to that in a moment. Let me, if Mr Howarth will allow me, deal with the two points that he has raised. Firstly, in terms of relationship, I have been quite clear this afternoon about the issue. We are talking about substantial relationships; we need to work out exactly what that means but we have already used criteria that we have had to use because this particular matter in relation to death-in-service has already been used on occasions in terms of compensation. We have started to use some of that and we are still working that out, and I think that is what you would expect us to do, based on circumstance, and I think that is very important. The second point you raised seemed to me to be rather bizarre, actually. I do not accept that at all. I do not think that we will be in that position. Members of the Armed Forces who join this scheme from 6 April 2005, whether or not they are new recruits or people transferring to the scheme, will be well aware of the rules of the scheme and we will make sure that is properly communicated to them. The rules will be there and they will be abided by. That does not mean that we should not follow the agenda which I know you do not share, Mr Howarth, and we have discussed this many times in other places; you do not share that equality agenda, you do not share those same views and I readily acknowledge that, but those are the views that I share and the Government shares, and we intend to pursue that agenda.

  Q38  Mr Howarth: May I just refer to one other point in this connection made by the Forces Pension Society? They say that the announcement that unmarried partners under the new scheme will in future receive the same benefits as married couples has provoked a backlash amongst the victims of traditional legacy issues. I do not want to go into the legacy issues but you know what they are—the pre-1973 retirees and the pension drop, and all that sort of issue. There clearly is an issue here that you are looking favourably at unmarried partners and that those who have had a long-standing concern are being ignored in favour of extended benefits to unmarried partners.

  Mr Caplin: Again, we are talking about the future here and the future way it looks, in terms of Armed forces. I should just say that we have tested this; this consultation process has not just been about the Select Committee, much as we value the role that Select Committees play; we have actually spoken to members of the Armed Forces about this, we have spoken to the ex-service community, and in the end you have to come to an overall decision and decision package, which is what we are trying to now pursue.

  Q39  Mr Howarth: You have sent out 5,000 questionnaires on the unmarried partners business. Admittedly the document has been—

  Mr Caplin: You can consult in many ways. Since 15 September, whenever I have been out and about with members of the Armed Forces we have discussed the pension and compensation arrangements I have announced and they have been pretty much welcomed, and that is without them knowing the full details.

  Mr Howarth: I do accept that there are many provisions in this which are good news. We all agree on that.


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