Contingent Liability

Tobias Ellwood Excerpts

Friday 11th May 2018 Written Statements

[The Parliamentary Under-Secretary of State for Defence (Mr Tobias Ellwood)]

I am today laying a departmental minute to advise that the Ministry of Defence (MOD) has received approval in principle from Her Majesty’s Treasury (HMT) to recognise a new contingent liability associated with the NAAFI pension fund. Negotiations are ongoing and the contingent liability will come into force on signature of a pension guarantee.

The departmental minute describes the contingent liability that the MOD will hold as a result of the NAAFI pension guarantee. The maximum contingent liability against the MOD is £223 million. It is usual to allow a period of 14 sitting days prior to accepting a contingent liability, to provide Members of Parliament an opportunity to raise any objections.

NAAFI is a company limited by guarantee controlled by the MOD through the NAAFI council. The guarantee would remove the risk of the MOD, as a result of its relationship with NAAFI, being required by the Pension Regulator to fund all or part of the deficit calculated on a buy-out basis on or before 2021 should NAAFI be wound up. It would save the MOD up to £5 million per annum, this being the current undertaking made annually to NAAFI, to reduce the pension fund deficit. It would also negate the risk of MOD losing the NAAFI’s services in the territories in which it operates creating potential gaps in service affecting MOD personnel.

[HCWS677]