Gurkha veterans lost a high court test case battle with the Ministry of Defence over pensions today.

Soldiers who retired before 1 July 1997 accused the MoD of discriminating against them on the grounds of nationality and age. Pension rules were altered in 2007 to give Gurkha soldiers pension rights equal to their UK counterparts. They were given the option of transferring to the UK armed forces pension schemes, leading to marked improvements in their retirement income.

The British Gurkha Welfare Society said about 25,000 men who retired before July 1997 were denied the opportunity to transfer, leaving them with only a third of the income of UK-based soldiers. Their pension scheme paid substantially lower benefits based on the cost of living in Nepal, the homeland to which veterans traditionally retired.

Lawyers for the veterans argued that the failure to give equal pension rights to all retired Gurkhas, who had the right to settle in the UK, amounted to unlawful discrimination on grounds of nationality and age, in breach of the Human Rights Act and EU discrimination laws.

Justice Burnett, sitting in London, spoke of the "high regard" the British people had for the Brigade of Gurkhas. But he rejected the grounds of challenge and ruled the MoD had not acted unlawfully.

The British Gurkha Welfare Society's general secretary, Chhatra Rai, said the group would seek leave to appeal. "It is very regrettable that the Gurkhas were yet again forced to take the British government to court and disappointing that we did not win the case, though we have understood that this was not likely to be the end of the road," he said.

"The approach of the MoD makes no sense since it is clear that considerable cost savings could be made if Gurkhas would feel less pressure to settle in the UK, as this would also put less pressure on the British welfare system."

The Ministry of Defence estimates giving future equal monthly pension payments to this group of Gurkhas would cost £75m a year. However, the government has also estimated that it would cost£300-400m a year in welfare and healthcare provision for veterans and dependents moving to the UK.

George Howarth, Labour MP for Knowsley North and Sefton East and sponsor of a parliamentary motion supporting an improved Gurkha pension, said: "The fact that this small but significant group of veterans are still discriminated against shows that there is still more to do to ensure that the Gurkhas are treated properly and fairly."

The Tory MP and former minister, Ann Widdecombe, a long-time champion of the Gurkhas, said: "The Gurkhas have always been an integral part of the British armed forces, fighting the same wars and carrying out the same duties as British soldiers. It is an injustice to give these veterans a pension based on their country of origin instead of the country in whose army they loyally served."

Article from The Guardian