Troops injured fighting in Afghanistan and Iraq will receive increased pay-outs under an overhaul of the Armed Forces Compensation Scheme announced today.
One-off awards for individual injuries will be increased by more than 50% in some cases, while the rule limiting compensation to the first three injuries suffered in a single incident will be scrapped.
The guaranteed lifetime income paid to the most seriously injured service men and women who are unable to carry on working will also be raised to reflect likely promotions they would have received and extended retirement ages.
The increases will be backdated to cover all personnel who have been compensated under the scheme since its inception in 2005 when it replaced the old war pensions.
Announcing the changes, Defence Secretary Bob Ainsworth said that he believed that they would ensure that the forces had a compensation scheme that was "fair and just".
"They must have confidence that when they are injured due to their service, that they and their family will be fully cared for, right through their initial treatment to their long-term convalescence," he said.
"And they must have confidence that we will provide them with a fair and just compensation scheme as part of that support."
The changes follow a review of the scheme chaired by the former chief of the defence staff, Admiral Lord Boyce.
Lord Boyce said that as a result of the recommendations - which the Government has committed to implement in full - the UK armed forces would have a scheme that compared "more than favourably" with most other countries.
Under the Ministry of Defence's tariff system, the award for the most serious injuries will remain at £570,000, but the other award levels below that will be increased.
For the second level it will rise from £402,500 to £470,000 and for the third it will go up from £230,000 to £380,000.
However Lord Boyce said that the biggest changes would be to the guaranteed income payment system, based on salary, which would be changed to reflect the average number of promotions a person of their age could expect to receive.
It will also reflect the fact that most people will work until 65 rather than 65.
The youngest troops who suffer life-changing injuries will particularly benefit from the changes, with a 21-year-old private receiving a 35% increase in their monthly payments.
In total, a service man or woman who was also eligible for the most serious one-off payment, could receive £1.5 million in compensation over the course of their lifetime, Lord Boyce said.
Mr Ainsworth said: "I have been particularly concerned that the youngest soldiers who suffer life-changing injuries in Afghanistan are properly supported for the rest of their lives.
"Increasing the guaranteed income payment they will receive for the rest of lives will make a real difference to their quality of life."
Other changes under the review include the introduction of fast, interim payments so that injured troops can receive some compensation before their full claim is processed.
The maximum award for mental illness will be increased and a new expert body established to advise on compensation for particular injuries and illnesses, such as hearing loss, mental health problems, and genital injuries.
The time limits under which claims can be made will be extended and improvements made to the way information about the scheme is made available to service personnel about their families.
Mr Ainsworth said that the Government was committed to implementing the changes as quickly as possible, although some would require secondary legislation, and Lord Boyce said that he hoped the process could be completed within a year.
It will continue to be funded out of the MoD's budget, although no estimate has been made of the additional cost.
Mr Ainsworth announced last July that the review of the scheme, which was already planned, would be brought forward amid growing criticism that the level of compensation was inadequate.
The MoD had already doubled the top-level awards in 2008.
Last year it went to the Court of Appeal in July to challenge tribunal rulings which increased the pay-outs to two servicemen who developed medical complications after treatment for their initial injuries.
The case focused on the levels of payment made to Corporal Anthony Duncan, who at the time of the hearings was on active service in Helmand Province in Afghanistan, and Royal Marine Matthew McWilliams.
Cpl Duncan, of the Light Dragoons, who was shot while on patrol in Iraq in 2005, was originally awarded £9,250, which was increased to £46,000 by a Pensions Appeal Tribunal.
The £8,250 award made to Marine McWilliams, who fractured his thigh in a training exercise, went up to £28,750 on appeal.
In August Mr Ainsworth's then-parliamentary private secretary, former Army Major Eric Joyce, said that success for the MoD in the case would be "a victory for bureaucracy over bravery" and called for it to be dropped.
In October the Court of Appeal partly upheld the MoD's challenge but the Royal British Legion, which backed the two servicemen, heralded the ruling as "a tremendous win" for the compensation rights of wounded troops.Reuse content