Last updated at 16:48 13 March 2007

Created: 8 March 2007

The Gurkhas are finally to be offered equal pensions to the rest of the British Army, the government has announced.

The decision follows a two-year review of the conditions and terms of service of the Army's Brigade of Gurkhas which recruits in the Himalayan mountain kingdom of Nepal.

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Under the terms of the review announced by Defence Minister Derek Twigg, women will also be offered the chance for the first time to join the brigade.

The new pension deal will be available to all troops who left the Army from July 1997 when the Gurkhas became a UK-based brigade following the handover of Hong Kong to China.

Mr Twigg said it was a "momentous day" for the Gurkhas, who have served with the British Army since the 19th century.

"There is no doubt in my mind that it was the right thing to do," he said.

"As a Government we have continually sought to ensure equality amongst our workforce here in the UK. The improved terms and conditions will form the basis for continued Gurkha service in the British Army."

Current Gurkha pension arrangements are based on living standards in Nepal - which are much lower than in the UK - with payments typically around a sixth of those made to their British counterparts.

The new arrangements will still leave thousands of veterans who retired before July 1997 out in the cold.

Mr Twigg said that extending the deal to them would have cost billions of pounds as it would have had implications for workers across the public sector.

"It is unaffordable. It is not just a question of whether we do it for the Gurkhas - it goes right across the public sector," he said.

The new arrangements will cost around £30 million a year.

Currently a private in the Gurkhas who retires after 15 years service receives an annual pension of £1,200.

Those who transfer to the main Armed Forces Pension Scheme will be entitled to a pension of £6,600, although they will have to complete 22 years service to qualify. Otherwise they will have to wait until they are 60.

The review will also enable Gurkhas to transfer to other branches in the Army or to the RAF or Royal Navy once they have completed five years service in the brigade.

The brigade will start recruiting women from 2009 as signallers, engineers and logisticians, although, as in the rest of the Army, they will not serve as infantry.