The Nation - News from July 2, 1986

President Reagan signed a major overhaul of the military pension system that will reduce retirement benefits for new recruits after Aug. 1. The measure, designed to cut long-term costs by about 18%, does not affect the 1.4 million people now drawing pensions or potential benefits for the 2.1 million now eligible for pensions. Under the new law, people retiring after 20 years will receive a pension of 40% of basic pay. Beyond 20 years, the annuity would increase 3.5% each year to a maximum of 75% at 30 years. Currently it is 50% after 20 years and 75% after 30 years. The new law also will reduce annual cost-of-living increases.