Memorandum from the Ministry of Defence
ESTIMATES MEMORANDUM 2006-07: ARMED FORCES
RETIRED PAY AND PENSIONS
SUMMARY OF
CHANGES SOUGHT
IN THE
ESTIMATE
1. The Armed Forces Pension Scheme Main
Estimate requests provision of:
(a) Net resources within Request for Resources
1: £4,588.662 million.
(b) Net Cash Requirement: £1,584.369
million.
2. This Memorandum covers the Estimate for
the Armed Forces Retired Pay and Pensions for 2006-07. The Scheme's
spending plans for this financial year are based on the expected
take up of pensions of retired personnel. The Estimate covers
only the payment of pensions. The costs of administering the Scheme
fall to the MOD Main Estimate. The Armed Forces Pension Scheme
is a demand led service and is therefore AME; as a result there
is no Spending Review settlement against which to compare it.
The costs of the scheme are forecast every six months for both
the current year and future years. As a result we have compared
the Estimate with the latest forecast submitted to Treasury.
DETAILED EXPLANATION
OF THE
CHANGES
3. The Estimate for 2005-06 included non-budget
expenditure of £9.93 billion relating to the increase in
the value of provisions held on the Balance Sheet as a result
of the change in discount rate from 3.5% to 2.8%. There will be
no change in the discount rate for 2006-07. The non-budget element
of the estimate is therefore not applicable to this financial
year.
4. An increase of £67.956 million in
receipts due to higher than anticipated SCAPE (Superannuation
Contributions Adjusted for Past Experience) receipts has been
included due to the introduction of revised rates of SCAPE from
1 April 2005. This change is shown as a reduction in the resources
required in the table below. SCAPE replaced the old ASLC (Accrued
Superannuation in Lieu of Contributions) as the basis of contributions
to the scheme.
5. An increase of £85.369 million in
Current Service Costs has been calculated on the level of SCAPE
costs which has then been multiplied by an agreed Government Actuary
Department factor, which is 1.29.
6. An increase of £23.102 million for
interest on Scheme Liability has been applied due to higher than
forecast Service provisions liabilities.
ANALYSIS OF
CHANGES BETWEEN
LATEST FORECAST
AND ESTIMATE
| Total AME £m
|
Previous Forecast | 4,548.147
|
Higher than anticipated SCAPE receipts |
-67.956 |
Increase in Current Service Costs and change in multiplication factor
| +85.369 |
Increase for interest on Scheme Liability |
+23.102 |
Revised Estimate | 4,588.662
|
2 May 2006
|
|
|