Servicemen and women are to be rewarded for their "tireless work as a force for good" with an inflation-busting pay rise of at least 3.7 per cent - with some getting more than four per cent.

And military pilots are to be encouraged to remain in the Forces with a range of special retention incentives.

Defence Secretary Geoff Hoon yesterday announced that the annual award recommended by the Armed Forces Pay Review Body (AFPRB), which will take effect from April 1, has been accepted in full by the Government.

The AFPRB, an independent voluntary group, has also made additional recommendations for aircrew, which boost the earlier retention packages adopted by the Armed Forces.

Mr Hoon said: "British Armed Forces have had an exceptionally busy year, both at home and abroad.

"From Foot and Mouth to Macedonia to Afghanistan, our Servicemen and women have never failed to achieve what we have asked of them.

"This year's pay award is nothing less than they deserve for their tireless work as a force for good."

Chief of the Defence Staff Admiral Sir Michael Boyce said: "I am delighted that the pay recommendations have been accepted in full and without staging.

"Over the last 12 months, our Armed Forces have worked across the five continents of the globe to protect Britain's interests, sometimes in very difficult and dangerous conditions.

"I would like to extend my thanks to all the members of the Armed Forces for this work."

The AFPRB takes many variables into account when determining its recommendations, including the salaries of civilians in like work, retention, recruitment and motivation.

The groups who will benefit by more than the basic 3.7 per cent are:

Privates/Lance Corporals in pay range 1 (lower), who will receive 4.2 per cent.
Captains and Majors, who will receive 4.2 per cent.
Warrant Officer 1s, who will receive additional pay increases of between 0.4 per cent and 3.3 per cent.
Under 17s and adult new entrants, where the starting rates will increase by 12.5 per cent and 4.2 per cent respectively.

The AFPRB endorsed the MOD's Aircrew Retention Review proposals for aircrew remuneration which involves two Financial Retention Incentives from April 1, each with a five-year return of service:
£30,000 at five years before the Immediate Pension Point payable to pilots, navigators, RN observers, Officer rearcrew and selected NCO pilots.
£50,000 (for pilots, navigators and RN observers) and £30,000 (for Officer rearcrew and selected NCO pilots) at the Immediate Pension Point.

The additional cost to the defence budget of the pay rises will be £236 million.

The new pay bands at each Royal Navy rank are as follows (current rates in brackets):

Commodore: £73,737 - £76,880 (£71,106 - £74,135)
Junior captain: £61,473 - £67,945 (£59,280 - £65,521)
Commander: £53,086 - £58,681 (£51,191 - £56,586)
Lieutenant Commander: £37,821 - £45,297 (£36,296 - £43,472)
Lieutenant: £30,025 - £35,708 (£28,813 - £34,270)
Sub-Lieutenant: £23,433 - £25,897 (£22,597 - £24,973)
Midshipman: £19,495 (£18,798)
Warrant Officer: £30,565 - £37,022 (£29,182 - £35,420)
Chief Petty Officer: £26,313 - £34,252 (£25,298 - £33,029)
Petty Officer: £23,772 - £29,244 (£22,926 - £28,200)
Leading Rate: £20,546 - £26,280 (£19,812 - £25,342)
Able Rate: £12,578 - £22,918 (£12,071 - £22,101)