WEDNESDAY 18 DECEMBER 2002

DR LEWIS MOONIE, MP, MS LIZ MCLOUGHLIN, CBE, AND MR ALAN BURNHAM

  1. Minister, welcome. Sometimes when you are appointed it is, "First the good news and then the bad news. The good news is you are going to be a minister. The bad news is you are going to have all the difficult issues in your remit"!
  (Dr Moonie) I seem to attract them.

  2. I think most of them are coming up this morning. Thank you very much for coming along. Please do not feel any sense of guilt about farming the questions to other people to your left or right, or at least three rows back. If you want any assistance from those representing the special interests, I am sure they would be more than delighted to give you advice too! We will start off with the first question on timescale for new pension and compensation arrangements. Are you still confident that the timescale for the introduction of the new pension and compensation arrangements will not be held up by the delays that we have experienced so far? Any further comment on the timescale?

  (Dr Moonie) From what I can see the procedures are on track to be brought in on the expected timescale of 2005/6. I do not think the past delays in the process (many of which were related to having longer periods of consultation and I think were, therefore, reasonable) should have a bearing on the future. The important thing is to try and get the initial stages right and then develop it as effectively as possible. However, I think you would be surprised if any MoD Minister came in front of you and gave an absolute guarantee that anything in the future would be on time!

  3. Are your officials confident that there is no further delay?
  (Dr Moonie) Perhaps I should introduce Liz McLoughlin who is Director General of Service Personnel Policy; and Alan Burnham who, I am glad to say, is now confirmed as the Chief Executive of the Veterans Agency.

  4. The Minister said he could not see any possible delays—do you see any?
  (Dr Moonie) That is not what I said! I said I could not see any delays relating to what had gone on already. Obviously the scheme is very much dependent on the administrative systems which are brought in.
  (Ms McLoughlin) Yes, I think the recent last few months have been spent very profitably. You will have your own views, no doubt, on that. The consultation process has been very productive. We are hopeful that we are now quite near completion, and aim to put the proposals to our ministers collectively very soon. Thereafter there is a fair amount of work to do in some respects on legislation and some of the prerogative instruments. There will be a lot of detailed work to do—you touched on that the last time you met—and it is important to get that right. So we have got a fair way to go. Clearly, as we said to you last time, our assumption at the moment is that the new pension and compensation schemes would be delivered through our new Joint Personnel Administration Systems. I think you expressed a view of MoD's ability ever to deliver major IT projects to cost and time. Clearly, we will be looking to see whether those timescales are still on track. At the same time then as doing detailed work, we will do some fallback options if there is undue delay on the delivery of JPAS, as we call it, which might lead us to have a different course of action.

  5. The Forces Pension Society gave a note to us and indicated that the Joint Personnel Administration System "may have difficulty in meeting its own target date because of lack of resources". Is that a justifiable complaint? You are confident, I presume, that the Joint Personnel Administration System will be introduced according to schedule? Is it adequately resourced?
  (Dr Moonie) The problem with complex systems like this is not one of resource. We are prepared to put the resources in which are necessary to do it. We are taking basically what is an off-the-shelf scheme and tailoring it to our own needs. You are talking to somebody who has had 25 somewhat bitter years often in bringing in new computer systems, but starting with an off-the-shelf system does give us an advantage. I would be loath though to give you an absolute guarantee that we would not run into problems with it, because these things can arise; but it is not a matter of resources.

  6. That is unusual for the MoD. About the only pension scheme rattled through quickly was the pension scheme for senior civil servants in the Ministry of Defence. When we produced our report in May the MoD told us it was expecting to be able to present revised recommendations to Cabinet "by the autumn". In your memorandum we have just received you now say that "proposals are being revised and it is hoped to seek approval by departmental and other interested Ministers early next year". Can you amend slightly or add to what you said. Are we going to see it early next year, January or March?
  (Dr Moonie) The reason for the last delays have been doing extra work with the major stakeholders or representatives like the Forces Pension Society and the British Legion to try to tidy up some of the individual proposals. I would expect it to be coming to us probably at the end of January, beginning of February; but that depends very much on securing approval from other appropriate departments. I would be very surprised and disappointed were it not in our hands and published by the end of February.

  7. Minister, referring again to the views of the Forces Pension Society, it is their view that the Ministry of Defence uses the situation in the private sector to justify inadequate pension conditions for the Armed Forces. Do you agree?
  (Dr Moonie) No, I do not agree, in brief. Perhaps I had better expand on that. We do use them as comparators, and I think that is perfectly fair. What are the functions of a pension scheme? One is to provide a fair reward for those who have given you service; and the other is to attract them into service in the first place. Clearly, if your scheme becomes more attractive than comparable schemes, where people are making choices, then it will enhance their decision-making, hopefully, in our favour. I think it is perfectly reasonable to use them as a comparator.

  8. Following up on that, you think it is important, you would say, that the Armed Forces Pension Scheme seems favourable in comparison to private sector schemes?
  (Dr Moonie) Wherever possible, yes. I would also like to think that it would bear a comparison with any other public service scheme as well. In fact, the norm in the private sector, which seems to be moving away from final salary schemes, has little bearing on a public scheme, where there is absolutely no proposal in mind to move away from that for any public scheme[2]Given the overall level of benefits for people, I think it is reasonable to make that comparison.

  9. Your view is clearly that it is the comparison of maintaining what you see is a favourable scheme, that is the value of comparing it to private scheme pension schemes?
  (Dr Moonie) I think it is. When people in their late teens and early 20s are joining the Armed Forces I suspect that, up until very recently, they have not paid too much attention to the pension arrangements, like most people of their age. It may well be that the great concentration on pensions issues in the public eye over the past few months has concentrated their minds on it, and will make them look much more closely at the overall package of benefits, rather than the bottom line salary from the start.

  10. Minister, just carrying on in the same vein, the MoD claims that the benefits offered by the AFPS are "better than average and in a number of respects the most generous". You touched on that, but what evidence do you have of that which you could give us?
  (Dr Moonie) If I could refer to one of the many bits of paper, and there are lot more than you would think, sitting in front of me here. In one of our memoranda[3]we actually did have a small table, which was brought to my attention yesterday, which goes over it—things like normal retirement age, obviously; because of our retirement age that is looked on as a benefit rather than a disadvantage of the scheme, and is pretty well unique at the age of 40. It is a non-contributory scheme, although I have to say the Armed Forces Pension Review Body do take these things into account when they calculate salaries. These are all put in the upper levels of pension schemes. The pension and lump sum accrual rates again are in the upper track.

  11. What is that as a comparison against?
  (Dr Moonie) As a comparison against other public sector pensions, which I think is the appropriate comparator.

  12. That is certainly not the view of the Forces Pension Society. I am quite sure they will speak for themselves. I am just worried when I read from a bland statement that, "We're better than average", or, "better than others".
  (Dr Moonie) I would be disappointed if that had been made as a complacent assurance; but we have done the work to compare what we do with other schemes. As I say, the table does show that on virtually all of the individual aspects of the scheme ours is a very good scheme indeed.

  13. More specifically, do you consider that the level of abatement as calculated by the Government actuary, which is currently at 7 per cent, is a fair reflection of the value of the pension to individual service personnel?
  (Dr Moonie) I think I do; but it is really not for me to say that. This, again, is a matter for the pay review body, and they guard their independence from us very jealously. This is actually a decision which they made and they in general, from what I know, are satisfied with the level of abatement that is used.

  14. We understand, Minister, you are considering extending the period of qualifying service for pensions and deferring the age from which preserved pensions are paid. Can you confirm that this is so?
  (Dr Moonie) I think it is reasonable to confirm that we have been considering that; and that we would like to see people capable of accruing a larger pension, yes.

  15. Are you also considering increasing the retirement age from 55; that seems to be the policy elsewhere?
  (Dr Moonie) Not in the Armed Forces it is not. The retirement age will remain 55.

  16. You have no plans?
  (Dr Moonie) We have no plans to change that. That is a terrible thing for a minister to say, because that usually means we are going to do it tomorrow! I can assure you in this case that is not the case. We do not intend to raise the retirement age.

  17. With no exceptions?
  (Dr Moonie) There are a few exceptions just now, actually, medics for example. There is no doubt that in the past medical people in particular, compared with people outside the Service, have suffered because of some of the pensions. I think in general they are allowed to serve later. Lawyers as well, who we would want to keep. Chief of the Defence staff and one or two others but, by and large, the rule will be 55 and that will remain.

  18. Because of the shortage of personnel there have been people two or three years over the retirement age because we were so desperate to find people to undertake the tasks. Would there be any effect on their pensions if the special status is deployed to allow them to stay on, if it is not too physical a task?
  (Dr Moonie) In the legal sense of the rules of the pension scheme, I am not sure.
  (Ms McLoughlin) I think we are perhaps talking about two different things. One is the normal, general, usual age of retirement. The Minister has already said that already we have flexibility at the moment for people to go earlier or later, maybe according to their skills. The other is the age at which pensions are payable—we have no plans to change the age of 55 as the age at which pensions are payable. The extent to which somebody might be able in future to serve beyond 55 and go on accruing towards a pension I think would depend very much on their length of service.

  19. You would have to change the whole scheme?
  (Ms McLoughlin) The new scheme is based on accruing over 35 years to an age of 55. All I am suggesting is, if a late entrant is unable to accrue those 35 years then there is flexibility to go beyond that.

3   HC 1115, Published as the Fifth Special Report, Session 2001-2002. Back