3 Armed Forces Retired Pay, Pensions etc
Supplementary Estimate
14. The MoD sought, in the Armed Forces, Retired
Pay, Pensions etc Estimate, a net increase in Resource Annually
Managed Expenditure (AME) of £370 million; seven per cent
of the expenditure requested at the time of the Main Estimate.
The increase in AME results in an increased net Cash Requirement
of some £200 million.[21]
15. The increase in the net Resource requirement
is due to the increase in the long term liability of the Armed
Forces Compensation Scheme plus higher interest payments on the
Scheme liability. There has also been a shortfall in the income
from Superannuation Contribution Adjusted for Past Experience
(SCAPE).[22] Table 4
shows the breakdown of the increased requirement.
Table 4: Breakdown of the requested increase
in Annually Managed Expenditure in the Supplementary Estimate
for 2012-13
| Category | £M
|
| Shortfall in Income—for Superannuation Contribution Adjusted for Past Experience and other
| 52 |
| Increase in interest on the Armed Forces Pension Scheme Liability
| 100 |
| Increase in Armed Forces Compensation Scheme long term liability
| 270 |
| Less reduction in other categories
| (52) |
| Total net requirement
| 370 |
Source: Ministry of Defence[23]
16. The breakdown of the cash requirement of
£200 million is shown in Table 5 below. The shortfall in
income is due to higher than expected voluntary outflow of Armed
Forces personnel with a consequential reduction in superannuation
contributions. Redundancy costs have increased because of a higher
than expected number of redundancy payments to officers.[24]
Table 5: Breakdown of the increased net
cash requirement in the Supplementary Estimate for 2012-13
| Category | £M
|
| Shortfall in Income - for Superannuation Contribution Adjusted for Past Experience and other
| 52 |
| Increase in Pensions payments
| 20 |
| Increase in Pension lump sums
| 22 |
| Increase in Early Departure Payments
| 8 |
| Increase in Early Departure Payments lump sums
| 13 |
| Increase in pension transfers out
| 11 |
| Increase in AFCS Guaranteed Income Payments
| 4 |
| Increase in AFCS Widows and Dependents payments
| 1 |
| Increase in sums due from the MoD at year end A
| 116 |
| Less reduction in AFCS lumps sums
| (52) |
| Total net requirement
| 370 |
Note: A This one-off additional requirement will
not recur in future years
Source: Ministry of Defence[25]
17. We recognise that Annually
Managed Expenditure is, by its nature, difficult to predict accurately.
But we would expect that, as experience of implementing the Armed
Forces Compensation Scheme increases and the pattern of voluntary
outflow stabilises, the MoD would become better at estimating
costs, income and liabilities. We recommend that the MoD set a
target to keep any additional requests in the 2013-14 Supplementary
Estimate for the Armed Forces Retired Pay, Pensions etc to below
five per cent of that requested at the time of the Main Estimate.
21 Ev 13 Back
22
Ibid Back
23
Ev 14 Back
24
Ibid Back
25
Ibid Back
| 
