Archived documents 2002 - 2004
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Question in the House of Commons 13th December 2004
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Mr. Derek Wyatt (Sittingbourne and Sheppey) (Lab): What funding additional to the £400 million already announced will be available to former employees of ASW Sheerness, whose occupational pension scheme is in administration.
Mr. Bill Tynan (Hamilton, South) (Lab): When he expects individuals who lost pension entitlement owing to scheme closures will benefit from the financial assistance scheme.
The Secretary of State for Work and Pensions (Alan Johnson): We are keen that the industry should have the opportunity to offer support to the financial assistance scheme, either by voluntary financial contributions or assistance in kind. In April, we will set up the body to administer the FAS and, following the formal consultation, we will lay regulations before Parliament, and make payments as soon as practicable thereafter.
Mr. Wyatt: I thank the Secretary of State for that answer. Will he clarify one issue? There is to be a review of the scheme after three years. If there is insufficient money in the scheme by then, will the review allow money additional to the £400 million to be paid in?
Alan Johnson: We have announced that £400 million will be the amount of money available over 20 years. The review will take place after three years, when we shall look at how the scheme is operating. We have made no commitment to increase the funding at that stage.
Mr. Tynan: My right hon. Friend will be aware of the continuing enormous concern as to whether the £400 million will be enough. I was contacted this week by one of my constituents, who has been told that he will receive £8,600 from his wound-up scheme. He asked me whether the £400 million will be used to make up the one third that he will not get from his scheme, as he hopes. We know that there is going to be a certain amount of money in the scheme's funds. Will my right hon. Friend tell us whether that £400 million will be enough, or whether there will be a shortfall because of the amount of people needing to receive money?
Alan Johnson: We calculated back in June and we published a statement to say that we believed from the information we had that about 65,000 people needed assistance with schemes that had become insolvent. We made our assessment on that basis. Obviously, we need much more information, but let me make this absolutely clear once again: we have not said that we will be able to match the assistance—the compensation available—in the pension protection fund, nor do we accept any liability for what has happened in the past.
We have said that we should be able to provide some assistance, particularly to those people who have lost the most and are in the worst position in terms of being closer to retirement and who cannot make up that money because of that proximity. So we have made it absolutely clear that we do not in any way pledge to meet every single amount lost from these schemes. We also said in our statement of 2 December that we will have a de minimis £10 below which we will not offer compensation.
Mr. Nigel Waterson (Eastbourne) (Con): Has the Secretary of State seen that the US parent company blames his pension legislation for the most unfortunate breakdown of negotiations over the Turner and Newell pension scheme? Does he accept the view of industry experts that that very collapse could swamp both the FAS and the PPF? Is it not high time that he admitted what everyone else already knows—that the FAS is not remotely adequate for the task it faces?
Alan Johnson: Well, I have heard a few good jokes over the Christmas period, but I have not heard that one before. It is a real cracker—our pension protection fund is responsible for Federal-Mogul's problems with Turner and Newell. I do not accept that at all, although Conservative Members may be more gullible than we are on these Benches.
The situation with Federal-Mogul is very serious. That company is not in insolvency and we expect that it can meet its commitments. Indeed, negotiations are going on now. We think that the amount in the FAS will give proper compensation. I question the assertion made by the hon. Member for Eastbourne (Mr. Waterson) that, somehow, the Opposition could do better than this, because from what I see—£35 billion spending cuts and, I presume, 100,000 staff to go from the Department for Work and Pensions—I doubt whether they would have the money even to administer the FAS, let alone—
Mr. Speaker: Order. I think we will leave that one.
Paul Holmes (Chesterfield) (LD): Those facing financial devastation as a result of losing their occupational pensions through no fault of their own include constituents of mine who work for Chesterfield Cylinders, Dema Glass and Coalite. They soon saw that the £400 million in the FAS was a cruel con trick; it was far too little to provide the compensation needed. Ministers seem to accept this, because they have said that they hope that industry will make up the shortfall. If, as it appears from the Secretary of State's earlier answer, industry has not provided any money to make up the shortfall, are the Government prepared to see these people face a bleak old age, or will they make up the difference?
Alan Johnson: The hon. Member for Northavon (Mr. Webb) has put on a bit of weight since we last saw him—it is pleasant to have the hon. Member for Chesterfield (Paul Holmes) stepping in. I do not accept the hon. Gentleman's point that this is a cruel deception. Most people thought it extraordinary that a Government would provide such assistance in retrospect. Certainly in view of the experience under previous Governments, no matter what we are considering, it is very rare for such a thing to happen and it is very unlikely that it would have happened under the previous Government. We think that the money available is sufficient. We have also said right from the start that we would welcome a financial contribution from the industry. It is fair to say that we have not been swamped with money, but we live in hope.
There is also the money that is still in some of those schemes and the deemed buy-back arrangements that could add extra money to it, but £400 million is a significant contribution for the Government to make, giving some financial assistance with the real problems that the hon. Gentleman raises on behalf of his constituents.
Mr. Geoffrey Robinson (Coventry, North-West) (Lab): I agree with my right hon. Friend in dismissing the hypocritical and nonsensical remarks from the Opposition. In respect of Federal-Mogul, can he confirm if not today, then in the near future, that if indeed the Americans have resiled and remain in the position of repudiating the undertakings they gave to Members of all parties in the House some weeks ago, and that if the pension fund were to go into wind-up—a second order would be necessary to dispose of the assets, which could not come into operation until April next year—that pension fund would then benefit from the PPF arrangements and that, largely, the commitments could be met in that way?
Alan Johnson: I confirm that in the scenario that my hon. Friend paints that would be the situation; it would qualify for the PPF. It is also relevant to point out that there would be a substantial amount of money anyway, to assist us with that situation. Also, the money paid out from the PPF—if it came to that, and let us hope it does not—would not be paid out for several years. So the PPF is adequately placed to meet any commitment, including one from Turner and Newell.
Mr. Patrick McLoughlin (West Derbyshire) (Con): The Secretary of State said a few moments ago that he lived in hope. My constituents live in England, and they want to know what has happened over the past few weeks to the Turner and Newell pension fund, which they thought was sorted out, but which they now find has a great question mark hanging over it? Never mind living in hope—what hope is there for them?
Alan Johnson: The hon. Gentleman and I have clashed on various occasions, but in a good-natured way. I cannot understand a question that seems to place the onus in these negotiations on the Government Front Bench, the Opposition Front Bench or any other person in the House. The responsibility for the situation in relation to Turner and Newell and Federal-Mogul, which is of huge concern to his constituents and those of others around the House, is a matter for the company, its trade unions and its shareholders. It is up to them to find a solution to the problem, and I very much hope that he will join me in urging them to redouble their efforts to do so.
Mr. Frank Field (Birkenhead) (Lab): The Secretary of State keeps talking about the Government having put up £400 million. May I remind him that it is my constituents who are putting up that money, and they think that it is a very generous settlement? But as they and practically everyone else in the House do not believe that the £400 million will be adequate, who in the Government is blocking the suggestion, which is supported on both sides of the House, that the Government use some of the unclaimed assets to meet the bill, so that people have their pensions met in full?
Alan Johnson: I agree with my right hon. Friend that we should always be careful about talking about Government money—of course it is taxpayers' money. I also agree with him completely that his constituents and mine think it a very generous settlement. In terms of what we do with so-called orphan funds, we want to reunite those unclaimed assets with their rightful owners. It is a mistake to base policy on a financial assistance scheme of taking money when we do not know how much is there—I have heard estimates varying from £170,000 to billions of pounds—or on seeking to take money from accounts over which we have no control and which are owned by other people. The £400 million settlement, which is generous, as he recognises, gives far more confidence to the people affected than the suggestion that we can somehow match that from orphan funds.
Mr. David Watts (St. Helens, North) (Lab): Has my right hon. Friend had the chance to study my early-day motion 359, which calls on the pension industry to make a contribution? Does he agree that there is a moral obligation on the pension industry to make a substantial contribution to this fund?
Alan Johnson: I have studied my hon. Friend's early-day motion in great depth—I did very little else over the weekend—and know it word for word. It is an important early-day motion, as it matches what we would like, which is a contribution from the industry. We live in hope, as the hon. Member for West Derbyshire (Mr. McLoughlin) reminded me, and now that the FAS is on the statute book, and as we get closer to finalisation, I still hope that we will see contributions coming from that quarter.
Statement from the Parliamentary Ombudsman
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Following complaints from over 100 people the Parliamentary Ombudsman has announced that she will examine government’s action in connection with occupational pensions. She has chosen four representative cases to study, although the results of her investigation will apply to everyone. The investigations are expected to take about a year.
The statement below, which has been sent to everyone who submitted a complaint, details the scope of her investigations.
STATEMENT OF REPRESENTATIVE COMPLAINTS TO BE INVESTIGATED
The representative complainants allege maladministration on the part of the Treasury, the Inland Revenue, the Department of Work and Pensions (DWP) and the Occupational Pensions Regulatory Authority (OPRA) in relation to their responsibilities for final salary occupational pension schemes. They make the following specific complaints.
1. DWP and OPRA did not take proper care when informing the trustees and members of Defined Benefit (DB) occupational salary schemes about the degree of security of the pensions to be paid from the employers' plans. In particular, they failed to warn of the risks to non-pensioner members in the event that a DB scheme was wound up. Instead, publications appeared to provide unqualified reassurance. For example:
a) The OPRA guidance to Trustees published in 1998 stated that 'The MFR (Minimum Funding Requirement) refers to the amount of funds that should be in the scheme at anyone time in order to meet the scheme's liabilities if it were to be discontinued.’ This was incorrect, since the MFR was never designed to meet all liabilities of DB schemes on discontinuance, but trustees of such schemes would have been unaware that the statement was incorrect, and would have relied on it in their communication with members. Although the booklet was later amended, the amendments were not brought to the attention of all trustees.
b) Occupational Pensions guides published by DWP in May 2002 and October 2003 contained reassurances that occupational pensions were protected by a number of laws, and failed to describe the risks to pensions that might arise if a scheme were to be wound up.
As a consequence, the Government led members of DB schemes to believe that their pensions were safe in the event that their scheme was wound up when this was not necessarily the case.
2. Neither the Treasury nor DWP took action to draw limitations of the MFR to the attention of members of DB schemes. A report from the Faculty and Institute of Actuaries entitled 'Review of the Minimum Funding Requirement' submitted to the Treasury in May 2000 identified 'a large and worrying gap between the level of security which the MFR test actually delivers and the public's perception of what it would deliver'.
The report later stated: 'It is therefore a key conclusion of this review that there should be full and clear disclosure to members of the objectives and limitations of the MFR test and the consequences if their scheme should be wound up. '
This did not happen. Instead, guides aimed at scheme members continued to provide reassurances without mention of the risks (see paragraph 1 b above ).
3. The DWP approved relaxations in the actuarial calculations underpinning MFR on 15 June 1998 and 2 March 2002 without having due regard to the effect this would have on all classes of DB scheme members should a scheme be wound up. Members of DB schemes were not informed that the weakening of the MFR would have the effect that the security of their benefits would be reduced if their scheme were to be wound up.
4. Delays on the part of the National Insurance Contributions Office of the Inland Revenue in reconciling the Guaranteed Minimum Pension entitlements in respect of members of wound-up DB schemes have caused these schemes to be in winding-up for much longer than necessary. This has caused financial loss to members of those schemes arising from the additional administrative costs to the scheme and from a reduction in annuity rates during the period of delay.
The complainants consider that the maladministration they allege has led to injustice, in that, for members of such schemes, they were misled into remaining in their employer's DB scheme and lost the opportunity to move their pension fund elsewhere. They have received a substantially smaller pension than they had been led to expect, and the compensation scheme established by the Government is insufficient to cover their losses. They seek full financial redress for their loss. They also seek compensation for the distress caused to them and to their families.
Trustees of the schemes consider that they have been prevented from fulfilling their obligations to scheme members and that their professional reputation has suffered as a result. They seek a full explanation and redress for the inconvenience caused to them.
Press Release from Dr Ros Altmann:
PARLIAMENTARY OMBUDSMAN TO INVESTIGATE COMPENSATION FOR PENSION WIND-UP LOSSES. COULD COST GOVERNMENT £5-10bn
"It is wonderful news for the victims of this dreadful injustice that they may, at last, receive compensation for their suffering. They trusted the Government, trusted our pension system, but have been left in misery."
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Ann Abraham, the Parliamentary Ombudsman is launching a major investigation into pension losses suffered by members of final salary company schemes which are winding up. She has received complaints from MPs, scheme trustees and members, who allege that maladministration by Treasury, Department of Work and Pensions (DWP), OPRA and NICO (part of Inland Revenue) has led thousands of members of schemes in wind up to lose most or all their expected pension and caused significant stress and distress to them and their families.
Now she has decided that she has received sufficient evidence of maladministration, which may have caused the injustices complained about, to launch an official investigation, and that the trustees and members cannot reasonably be expected to have alternative remedies in the Courts.
It is wonderful news for the victims of this dreadful injustice that they may, at last, receive compensation for their suffering. They trusted the Government, trusted our pension system, but have been left in misery because of several major failings, including:-
1) Treasury and DWP ignored Actuaries’ advice to warn members that being fully funded on the official Minimum Funding Requirement (MFR) did not offer security on wind-up.
2) DWP and OPRA were careless with wording of official booklets sent to trustees, which wrongly told them the MFR guaranteed enough money in the scheme to meet liabilities on wind-up.
3) DWP relaxed MFR twice, without realising the effect on pension security of different classes of member, especially those close to retirement, who could lose their entire pension with no warning.
4) NICO delays in agreeing GMP entitlements have led to extra costs and lower pensions, as bulk annuity rates have worsened significantly over time.
The investigation, expected to take several months, could see £5-10bn compensation for the victims of this dreadful injustice.
The Government has so far refused to accept any responsibility for this injustice and offered £400m over 20 years in a Financial Assistance Scheme, which, if paid as £20m a year could restore pensions to around 100 people! This has merely raised false hope, and cannot address the scale of the problem.
There is fresh hope today of Government compensation for the 65,000 or more members of company pension schemes, who have lost their pensions. The Parliamentary Ombudsman is launching an investigation into the Government’s handling of final salary occupational pensions in the UK. She will consider charges of maladministration against several Government departments, after receiving complaints from many MPs, on behalf of constituents who have lost much or all of their occupational pensions when their company schemes were wound up. Her investigation will look at the policy decisions taken by Government departments, specifically H.M. Treasury, Department for Work and Pensions (DWP), Occupational Pensions Regulatory Authority (OPRA), and the National Insurance Contributions Office (NICO), which is part of the Inland Revenue.
The four specific lines of inquiry will be as follows:
1) The Treasury and DWP failed to act on warnings from the Institute of Actuaries, in 2000, to tell members that the Minimum Funding Requirement (MFR) standard, set by the Government for occupational schemes, did not fully protect their accrued pensions. Official booklets still reassured members that their pensions were safe, without warning of any risks, until 2003.
2) The DWP and OPRA did not take enough care when informing trustees of final salary schemes about the protection offered to members by the MFR. Official booklets wrongly told trustees that the MFR fully protected accrued pensions on wind-up, which is incorrect, but trustees did not know this and unwittingly misled members into believing their pensions were secure.
3) DWP approved relaxation of the MFR in 1998 and 2002, without due regard to the effect this would have on the security of members’ benefits in the event of wind-up. In particular, those close to retirement were unaware they could lose their entire pension and were still reassured by official material that their pensions were safe.
4) NICO has caused long delays to trustees trying to reconcile entitlements to Guaranteed Minimum Pensions (GMPs) for members of schemes in wind up. This delay has led to substantial losses of pensions for members of winding up schemes, because administrative costs have been incurred and annuity rates have worsened dramatically during the period of delay.
The Parliamentary Ombudsman has obtained legal advice which clears the way for her investigation to run alongside the case being brought by the Community Union. The union action is challenging the actual legislation passed by Parliament, claiming UK laws did not comply with the 1980 EU Insolvency Directive. The Parliamentary Ombudsman inquiry, however, cannot consider whether the legislation itself was appropriate, but is looking at whether the administration of the laws passed by Parliament was carried out adequately and the way in which policy decisions were taken. In particular, she has been asked by MPs to consider whether Treasury and DWP Ministers ignored relevant evidence when taking policy decisions related to occupational pensions and the extent to which information provided by official bodies to trustees and members of occupational schemes was inaccurate and misleading and therefore misdirected those relying on this information. MPs have asked her to consider whether their constituents’ pension losses are the result of such careless policy decisions, which, had they been implemented properly, could have avoided the injustices that members of UK final salary schemes are suffering.
The Parliamentary Ombudsman has decided that she has received sufficient evidence of maladministration, which may have caused the injustices complained about, to launch an official investigation, and that the trustees and members cannot reasonably be expected to have alternative remedies in the Courts.
This investigation is expected to require Government departments to release details of policy decisions and the rationale behind them. The Parliamentary Ombudsman has much wider powers than a Court of law to demand information and can interview Ministers directly. This will be a wide-ranging investigation and it is hoped that a recommendation will be made in a matter of months. If she finds that maladministration has occurred and that this maladministration has led to an injustice, she will recommend to Parliament that this injustice must be remedied and those who have suffered from it should be compensated. It is almost unheard of for Parliament not to follow recommendations made by the Parliamentary Ombudsman. Only 2 cases in the past 37 years have been turned down and none has ever been refused in circumstances such as these.
There have been many instances where the Parliamentary Ombudsman has forced Governments to compensate the victims of injustice. For example, the Channel Tunnel rail link, Continuing Care for the Elderly and the SERPS (State Earnings Related Pension Scheme) compensation, all of which cost the Government billions of pounds. If the investigation finds in their favour, compensation could run to billions of pounds – it is likely that it could cost £5 - £10billion.
The victims here are claiming full restoration of the pensions they were promised, and which they were told by the Government were safe and protected by law. They are also asking for her to award them compensation for the stress and distress they are suffering as a result of losing the pension to which they have contributed in good faith, relying on Government assurances. The devastating effect of this situation on the lives of these individuals and on their families is difficult to describe. Their health has suffered, they have been forced in many cases to sell their homes because they cannot afford to live in them and were relying on their pension to provide an income for them to live on.
High Court announcement “great news” says ASW union
Reacting to the announcement by Mr Justice Evans – Lomb, the Judge in charge of today’s hearing on the failure of the UK Government to properly implement European Law which would have protected the pensions 1,000 former steelworkers, Michael Leahy, General Secretary of Community (formerly ISTC and KFAT), the union representing the vast majority of ex-employees of the former ASW steel company in Cardiff and Sheerness, said:
“Today’s’ announcement by the Judge that he believes that the case we are bringing on behalf of our members formerly employed by ASW should be heard by the European Court of Justice and that it should be heard now is great news.
“It will be welcomed by our members in Cardiff and Sheerness and also the thousands of other workers who may benefit should our case be successful.”
Community is taking the action because of successive UK Governments’ failure to implement European law to protect workers pensions when their employers are declared insolvent. The law, Article 8 of the European Insolvency Directive, should have been implemented in member states by 1983, but the Conservative Government failed to do so properly, the union believes.
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Case for the Pensions Ombudsman
The Group believe that we have a strong case for compensation because, in simple terms, "nobody warned us of the risk". The following document, prepared by Dr Ros Altmann, outlines the background to this claim.
Please contact your local MP, present this evidence and tell them you wish the Parliamentary Ombudsman to investigate our case. If you would like a copy of this as a Word document please contact us. A complaints form, which should accompany your document, can be downloaded from the Omdudsman's web-site. (although the site does seem to be off line at frequent intervals). Also see the letter from Steve Webb MP which is two sections further down this page.
Successive Governments have led members of private sector final salary occupational pension schemes to believe that their pension rights are safe and protected by the law. In particular, after the Maxwell scandal in 1992, the 1995 Pensions Act was introduced, with the expressed aim of improving security for employer pension schemes and ensuring adequate funding levels, so that members’ pension rights were protected and employers could not raid pension fund assets in future, as Maxwell had done. A compensation scheme was established, to pay pensions to those who lost out if their employer behaved fraudulently. A Regulator was also set up (OPRA) and trustee boards were required to have member representation, so that the workings of pension scheme Boards were better regulated, with more direct input from members.
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Members were told by the Government and by all industry professionals, that the 1995 Act protected their pension rights. In practice, however, this has turned out to be untrue. Thousands of members of employer schemes, who were relying totally on their employer’s pension to fund their retirement, have suffered the loss of most or all of their pension, when their scheme was wound up – either when their employer became insolvent or alternatively when their employer simply decided not to support the scheme any longer. In both circumstances, members have lost most (and in some cases all) of their so-called ‘guaranteed’ pension.
The case we are asking the Parliamentary Ombudsman to investigate is that the Government and its various departments – in particular the Treasury and the DWP (formerly the DSS) - but also the FSA and OPRA, failed in their duty to ensure that members were protected in the way the Government said they were and failed to warn them of any risks to their contributions, as a result of scheme wind-up. If the law did not protect them, the Government should not have told members that it did.
This is not a complaint about the law itself. It is a complaint about Government actions which amount to maladministration, actions which damaged the interests of scheme members and inaction, in failing to warn members of the risks they were taking when contributing to their employer scheme. Government promoted and encouraged them to join their employer’s scheme, prevented them from being in any other pension and lulled them into a false sense of security about the safety of their contributions. There are many pieces of evidence in this case, which are in my possession and from which I will quote directly. The Government has agreed to set up a Trust Fund of £400 million to offer assistance to some of those who have lost out, but this fund is not sufficient to fully compensate members for the losses they have suffered and it is also designed to exclude several groups of members, which is unfair and unacceptable. Therefore, we are claiming that the Government has offered insufficient remedy to compensate for the damage done by its actions and its inaction.
If a financial services company ‘mis-sold’ a product to a member of the public, it would be forced to compensate for any losses suffered. For example, the FSA is pursuing companies who described products as ‘low-risk’ when investors subsequently lost money and asking them to pay compensation. The actions of the Government amount to mis-selling of employer pensions in an even worse manner. The employers’ schemes were not described as ‘low risk’, they were described as ‘no risk’! Yet members lost all their money. This surely demands full Government compensation for the losses suffered. The Government seems to have knowingly misled the public into believing schemes were safe and failed to put in any risk warnings, and failed to require anyone else to give any risk warnings, as to what the true position was regarding safety of contributions.
Section 1: Introduction: Government introduces 1995 Pension Act, claiming to protect pension rights.
The 1995 Pensions Act purported to protect members’ pension rights and ensure adequate funding levels. In practice, the Act only offered protection to those already drawing a pension, which meant that the contributions of those not yet receiving a scheme pension could be used to buy annuities for other people, and leave the contributors with nothing. The ‘interim’ priority order required scheme assets to be used first to buy index linked annuities for those already receiving a pension and the pensions of those not yet retired, even if they were a few days away from retirement and had contributed to the scheme for decades, could disappear. The level of protection offered by the Minimum Funding Requirement (MFR) was not adequate to ensure accrued pension rights would be fully met. However, members and trustees were led to believe that the MFR would deliver adequate funding for the scheme.
Section 2: OPRA gives trustees incorrect information.
OPRA Guide to Trustees, (page 28) sent out in 1998 states:
‘The MFR refers to the minimum amount of funds that should be in the scheme at any one time in order to meet the schemes liabilities if it were to be discontinued’.
This statement is untrue. The MFR was never designed to ensure that the assets of the scheme would be sufficient to meet liabilities on discontinuance. It was only designed to be adequate for meeting the liabilities of pensioners and to have a ‘50/50’ chance of meeting the accrued pension liabilities of those not yet retired. Thus, the Regulator sent out a booklet to scheme trustees, which the trustees would have been reasonably expected to rely upon as being correct, and which led the trustees to believe 100% MFR funding meant adequate funds to pay the pensions. The trustees would, therefore, have been likely to relay this incorrect information to members.
Section 3: Treasury and Department for Work and Pensions (DWP) ignore Actuaries advice and fail to warn members
In 1999, the Treasury asked the Faculty and Institute of Actuaries to prepare a report which investigated the workings of the MFR. This report highlighted that scheme members and trustees generally believed the MFR offered them full protection, when this was not the case. The Actuaries’ Report strongly recommended to the Government that it should, at the very least, tell all classes of members what would happen to their pensions if the scheme wound up. The Treasury and Department of Social Security (DSS, now renamed DWP) consulted on the Actuaries’ report and recommendations in September 2000. The official Consultation Document highlighted the strong advice from the actuarial profession about members’ mistaken beliefs regarding the safety of their pensions.
In fact, the consultation document states that ‘The Government wants to help people understand their pension rights and appreciate the value of saving for pensions’. It also states that, for defined benefit schemes, ‘there is no intrinsic guarantee that the accumulated funds will be able to deliver members’ pension rights.’ The Document emphasises that one of the ‘key conclusions’ of the Actuarial profession’s report, is the strong recommendation ‘that the new MFR test should be coupled with much clearer disclosure of the real position regarding the security of members’ benefits in the event of the scheme winding up, for each class of member’.
If it was really the case that the Government wanted to help people understand their pension rights, and if there was no guarantee that these rights would be delivered by their scheme, one would expect that the Government would be anxious to ensure that scheme members were told the truth about the security of their pensions. Indeed, the Government’s consultation stresses that ‘the concerns identified by the Actuaries all deserve informed and thorough discussion among the various interest groups concerned’.
Sadly, however, the Government failed to discuss this with the interest group most perniciously affected – the scheme members themselves. Furthermore, in its response to the consultation, in March 2001, the Treasury and DSS ignored the Actuaries’ advice and decided not to warn members.
Having been clearly and strongly advised that members thought their money was safe, when it wasn’t and having publicly stated that it was important that members should be warned that their pension rights were not secure on winding up the scheme, the Treasury and DWP failed to warn the members themselves and failed to require anyone else to warn them. This was directly against the Actuaries’ advice and also directly contradicted the aims of the Consultation, which were ‘to help people understand their pension rights’. This amounts to a failure of administration and resulted in losses to many members.
Section 4: Treasury (FSA) continues to tell members their pension rights are ‘guaranteed’, and fails to warn of any risks:
Even after the 2000 Consultation exercise, the Treasury, and its representative the Regulator, the Financial Services Authority (FSA) continued to tell members of final salary schemes that their pensions were ‘guaranteed’, ‘safe’ and ‘protected’ by the law. The Government had publicly consulted on the fact that this was not the case, yet still told the public that these pensions were guaranteed and safe.
Evidence: (Examples – more evidence in full documentation)
FSA guide to the risks of opting out of your employer’s pension scheme (quote from page 5):
‘Some types of employers’ schemes (the ones called ‘final salary’ or ‘defined benefit’ schemes) give you a guaranteed pension. The amount of pension you get from a personal pension is unpredictable’.
FSA guide to the risks of opting out of your employer’s pension scheme (quote from page 9):
‘Others, called ‘defined benefit’ schemes (for example, ‘final salary schemes) are different and offer guaranteed benefits.’
FSA guide to the risks of pension transfers (quote from page 7)
‘Defined benefit or final salary scheme: You are guaranteed a certain level of pension when you retire, as well as other benefits’
FSA guide to the risks of pension transfers (quote from page 9)
‘If you transfer from a final salary scheme to a money purchase scheme run by a new employer or to a personal pension, you give up the promise of a guaranteed pension. What you get instead is a pension whose value depends on how well the invested money grows.’
There is not one mention of the risk that the employer may choose to wind up the scheme or that insolvency could cause pension rights to be lost, which meant that the pension was not ‘guaranteed’ at all.
The Treasury, in effect, seems to have knowingly misled the public. It failed to act with due care and it put out material which it knew to be untrue. The effect of this situation is that members were robbed of the opportunity to protect their pensi0ns and were lulled into a false sense of security that their retirement income was safe. Many were in their 50’s or 60’s, and relying totally on their employer pension to support them in retirement. They have told me, if only they had known their money was not safe, they would have transferred out.
Section 5: DWP continued to mislead members too and failed to warn of the risks
Booklet produced by ‘the Pension Service’ (part of the DWP) called: Occupational Pensions Your guide May 2002 (quote from page 15)
'How do I know my money is safe? You are protected by a number of laws…OPRA can act quickly to protect your interests’.
Once again, there is not one word about the risk that your employer’s scheme could be wound up and you could lose your whole, or most of, your pension.
Booklet produced by the Pension Service (part of the DWP) called:
Occupational Pensions Your guide October 2003 (quote from page 15)
‘Is my money protected?’ the asset of the pension scheme belong to the scheme, not to your employer. As a scheme member, you are protected by a number of laws designed to make sure schemes are run properly and to make sure funds are used properly’.
Pensions Green Paper ‘Simplicity, Security and Choice’ December 2002, issued by DWP. Technical annex page 55
‘Accrued rights are clearly protected under pensions legislation and this will remain the case’.
The DWP knew that members believed they were safe, chose to ignore advice that they should be warned what the risks were and continued to tell them their money was protected by the law and that their accrued rights were safe. The DWP knew this was not true, also knew that scheme wind-ups could result in loss of most or all of the members’ pension, yet chose not to tell the members at all. The Government thus deprived members of the chance to protect their money and lulled them into a false sense of security about the safety of their pensions and their contributions.
Section 6: DWP continued to promote occupational scheme membership, without warning of the risks.
Letter from Malcolm Wicks, Minister of State for Work and Pensions, sent August 2003:
‘The Government will continue to promote occupational pensions…the Government has promoted these schemes and encouraged and supported employers and individuals to make private provision for retirement’
The Government cannot simply say that members voluntarily decided to join their employers’ schemes. It is, therefore, not acceptable for the Government to suggest it has no responsibility here. That is because, firstly, some members were compelled to join, but more importantly the Government continued to promote and encourage joining of the schemes, did not allow members to belong to any other scheme if they were in their employer’s scheme, and failed to warn of the risks involved in deciding to contribute to, or stay in, the scheme of an employer who may fail, or who may wind up the scheme. By claiming that the pension was guaranteed, the DWP prevented the members from looking after their own interests. This is maladministration and misleading the public.
Section 7: Government failed to put in any warnings to alert members to the risks that their ‘guaranteed’ pensions may not be ‘guaranteed’ after all.
Letter from OPRA to scheme member, June 2003
‘At present the legislation makes no provision which means trustees, or sponsoring employers of schemes have to provide you with details of the possible risk involved. There are rules regarding the disclosure of information, however, answering questions about the risks involved or advising on whether to keep money in a particular fund is not covered by law.’
The Government failed to put in any safeguards, either before or after 2000, to ensure that members would be told what the risks of investing their money in their employers’ schemes were. If a financial services company operated in this manner, the Government would force it to pay full compensation for any losses suffered. Surely, the same rules should apply to the Government and FSA. The Treasury and DWP have ‘mis-sold’ employer pension schemes to the members, by failing to warn of the risks. These schemes were not promoted as ‘low risk’, they were promoted by the Government as ‘no risk’!
Section 8: Treasury claims to be concerned that final salary pensions were described as ‘guaranteed’.
Letter from the Treasury to a scheme member, March 2004
‘I was somewhat concerned at your comments that your pension entitlement was promoted to you as ‘guaranteed’.’
The Treasury itself knew members thought their pensions were guaranteed and chose not to tell them that they might not be. The Treasury’s agent – the FSA- sent out information to members stating that final salary pensions were indeed ‘guaranteed’! This evidence shows a catalogue of errors, or knowingly misleading the pubic, by various Government departments. The members had no chance to protect their money and Government has not offered to fully make up for their losses. If the Treasury is concerned that the member’s pension entitlement was promoted to him as ‘guaranteed’ then it should be equally concerned, surely, that the Treasury itself (in the form of the FSA, which was acting on behalf of the Treasury) called these schemes ‘guaranteed’!
Section 9: Personal pensions ‘mis-selling’ led to members being told to re-join schemes which then failed.
Some members of employer schemes transferred out of the scheme after being sold personal pensions in the 1980’s and 1990’s. In some cases, these members were told they had been ‘mis-sold’ the personal pensions and they received compensation. The papers were full of stories that people should stay in their employer’s final salary scheme, since it was the best type of scheme and offered ‘guaranteed’ benefits. Some members received compensation for the apparent ‘mis-selling’ and were told by the Government to re-join their employer’s scheme. Having done this, the employer subsequently failed and these members ended up losing their entire pension.
The members, therefore, would have been better off not transferring back in and may not have been ‘mis-sold’ at all! Such advice and the whole atmosphere surrounding final salary schemes, has been a further contributory factor in lulling members into a false sense of security about their pensions. The Government created a myth that people should not transfer out into a personal pension and failed to warn that there might be circumstances, if the employer were not committed to the scheme, or might become insolvent, in which the members should definitely have considered transferring out. But no-one told them.
Final Salary Scheme wind-ups with solvent company employers.
By Richard Nicholls
The announcement by the Government on May 19th 2004 of a support package of £400 million to help the 60,000 workers who have paid for a pension, but are being told that there are insufficient funds to pay them, is welcome news. It acknowledges the fact that successive Governments have introduced flawed legislation to improve the security of occupational pension funds, given misleading information to savers and devalued the protection available.
Malcom Wicks and his colleagues at the DWP consistently told us that they did not want to raise false hopes, and now take the glory for supposedly thinking up the support package. Mr Wicks quoted on Money Box on Radio 4 on 15th May, said ‘They’ve effectively had their money stolen from them and through no fault of their own, and we think it is right that the public should support them and that’s what we’re going to do.’
So you can imagine the horror of finding out that in Clause 34 of the new Pensions Bill, provision is being made to produce a support fund of £400m over 20 years, but only for certain people. If your company is still solvent, your are to be excluded! Why? No one from the DWP has yet to answer this question. If you’ve got a broken pension promise, it doesn’t make any difference how or why the scheme is winding up.
Hints have been made that this group of people should try and get the deficiency from their employer! How? Legislation allowed the employer to stop paying into a scheme. This has been outlawed from 11th June 2003, but if your scheme went into wind up before that, you have no protection, and will not be included in Clause 34. This is immoral, cynical, penny pinching and unjust.
It should not be forgotten that most of the affected companies are only still solvent because the scheme trustees agreed to compromise on the deficiency debt, to allow the company to survive in business, so protecting jobs.
Can it be right that they should, in hindsight, have served the debt on the company, forced it into liquidation, just to be eligible for any government support?
The worker who has paid in all his working life to a scheme where the employer is still solvent is experiencing exactly the same pain as the worker who lost his pension through his company’s insolvency. He has consistently been told by government that his money is safe, guaranteed, secure and untouchable. What the government failed to mention was the flawed 1997 Pensions Act which, with good intent, tried to provide the security. It actually made matters worse, and subsequently allowed a devaluation of the Minimum Funding Requirement, which gave people an even bigger sense of security.
Protection is to be given to members of schemes that go into wind up with insolvent employers, either through the new PPF, or pre-PPF through the support package, and protection is given to solvent company scheme wind ups after 11th June 2003. It is only the members of solvent company pre 11th June 2003 wind ups who are currently left out in the cold with clause 34.
The number of schemes involved is relatively small, numbering less than 15 schemes and involving less than 4,000 people. This is the estimate from all schemes known about. Why penalise such a small number? Why should they be left destitute? They have done what the government asked, saved all their lives, only to be dismissed at the eleventh hour. They should, and must, be included, for the same reasons as pensioners of insolvent schemes have been thrown a lifeline. Why hurt this group any longer?
We see headlines proclaiming that clause 34 has ‘saved the workers from a dreadful retirement’. We saw the back slapping around the House when clause 34 was passed. If the government actually means what it says, why has it given us false hope and then dashed it? Why has it chosen to punish one section only?
The Government must, during it’s considerations over the workings of clause 34, accept that the injustice is universal, not selective, and include the deferred pensioners of solvent company schemes.
The companies known to the group are:
Dalgety, Daybrook Laundry, Felix Schoeller/Glorymill, Globeground (previously part of Lufthansa), FH Burgess, Lionheart, Lister Petter, Moore Products, Pacesetter Medical Products, Parsons Group, Rael Brook, Shipham, SIFAM and Technograv.
If you know of any other solvent companies which have closed their pension scheme, or can provide any further information please contact Richard Nicholl
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Letter to Parliamentary Ombudsman
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Steve Webb MP, Liberal Democrat spokesman for pensions, has sent the following letter to the Parliamentary Ombudsman. It is probable that several of us will start proceedings via the Ombudsman saying that all the government agencies misled us over the security of our pensions.
Re: Loss suffered by members of occupational pension schemes
I am writing to ask whether you would, in principle, be willing to investigate the extent to which maladministration by successive government departments and public bodies has contributed to the loss by many thousands of employees of some or all of their occupational pension rights. In this letter I will sketch out simply the outline of the case, but would be more than happy to supply further detail, provide case studies etc. I would also be happy to meet you or your staff at any time to discuss this matter. I anticipate that a number of other Members of Parliament will be making references to you over the coming months on the same issue.
The background to the issue is that defined benefit occupational pension schemes can be wound up for a variety of reasons. A common reason is when the sponsoring employer becomes insolvent . Where the pension fund has insufficient assets to meet its liabilities, the 1995 Pensions Act dictates that the rights of retired scheme members take priority, both in terms of their pensions in payment and future indexation of those pensions. Because these rights can be expensive to cover, the balance of the already limited fund can be far too small to meet the accrued pension rights of non-retired members who can lose some or all of their company pensions. It has been estimated that around 60,000 workers may have lost out in this way.
Clearly, governments cannot be held directly responsible for the insolvency of sponsoring employers nor for the fall in value of pension funds owing to stock market fluctuations. However, there is clear evidence that members of occupational pension schemes were not given accurate information or clear warnings about the risks associated with their membership of their company pension scheme. Indeed, some literature from government departments and other public bodies gave a quite misleading impression that company pensions were “guaranteed”, when this was far from true. As a result, workers were unable to make informed choices about the riskiness of different forms of pension provision and were given a false sense of security about their company scheme. Even though some workers could see that their employer was going through a hard time, they were confident that their pension was safe and made no alternative provision. Had they made alternative provision – for example, taking out a personal pension instead of their company pension – their pensions would now be safe.
I would be happy to provide you with a comprehensive briefing of the evidence for these claims, but the following are some examples:
• in 2000, the Institute of Actuaries advised the Treasury that members should be warned of the risks to their pension from employer insolvency; the Treasury decided not to warn people, as a result of which the FSA continued to tell workers that their employer pension was “guaranteed” in two separate booklets;
• the FSA ‘guide to pensions’ said, (under the heading, “reasons for joining an occupational pension scheme if you can”), “in a final salary scheme you know broadly how much pension you’ll get. This makes it easier to plan for retirement”.
• in December 2002, p55 of the technical paper accompanying the Pensions Green Paper said; “Accrued rights..are clearly protected under pensions legislation and this will remain the case”
• in 2003, the DWP produced “Occupational pensions: Your Guide” which said: “Q. How do I know my money is safe? A. You are protected by a number of laws….OPRA can act quickly to protect your interests&rdquo
Minutes of Emergency Meeting of The Pension Action Notch Group 22nd May 2004
Held at Mary Sumner House, Tufton Street, London.
ASW Sheerness: John & Sally Hayter, Andrew Parr, Jean Wade
ASW Cardiff: John Benson
Dexion-Hemel Hempstead: Peter & Jacquie Humphrey, David & Jenny Allen
Dexion-Gainsborough: Keith & Patricia Sargent
Burgess: Richard Nicholl
Kalamazoo: Peter Wheeler
Samuel Jones: Alan Marnes
Dr Ros Altmann, Alison Parr
Review of recent Government announcement and House of Commons Debate regarding the Pensions Bill
It was agreed that information coming out of the debate was very vague with a lot of variables that could and should be included when consultation continued.
It was also agreed that representatives from the Pension Action Group must be included in these consultations.
It was agreed that each group should ask its members to write to Mr. Tony Blair, Mr Andrew Smith and Mr Malcolm Wicks asking that members of the Pensions Action Groups be included in consultations.
It was agreed that specific questions relating to the possible outcome of these talks be raised in readiness for such inclusion.
It was agreed that a Press Statement be prepared containing our thoughts on the announcement of the ‘Assistance Fund’, but also our need to be involved during consultation stage.
It was agreed that our campaign would continue until full benefits were restored and as a reminder the next demo was planned for June 19th 2004 which is being organised by the TUC.
It was agreed that the next ‘Notch Meeting’ would still take place at Groby Village Hall near Leicester on 13th June 2004. Thanks to Paul Gill for organising this. Details to be posted on the website and by e-mail. All welcome.
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John Benson told us that a meeting had been held in the Cardiff area with Ian McCartney Chairman Labour Party, Kevin Brennen and Glennis Kinnoch where discussion took place regarding pension issue. Awaiting details.
Fiona Glover, presenter for BBC Radio 4, joined the end of the meeting to talk to various people about how we were managing our demonstrations and in particular the ‘Stripped of our Pensions’ turn out in Bournemouth last year. This we believe was in contrast to the ‘paint powder’ demonstration during Prime Minister Question Time on Wednesday last. Fiona was also interested in talking to the ladies that were to be later demonstrating as ‘Suffragettes’. These interviews were to be broadcast on Sunday 23rd during ‘Broadcasting House’
23rd May 2004
The Pensions Action Group welcomes the establishment by the Government of a £400million fund to ‘aid’ people who have lost most, in some cases all, of their occupational pension through scheme wind-ups.
We are also encouraged that Pensions Minister, Malcolm Wicks, publicly acknowledged on BBC Radio 4 Money Box on Saturday 15th May that our pensions have been stolen, through no fault of our own.
We do, however, have many concerns and questions regarding the structure and implementation of the fund.
As principal stakeholders, we therefore look forward to working with the Government throughout the forthcoming consultation periods.
The aims of The Pensions Action Group remain unchanged:
Every affected person is to have full restoration of their pension entitlements, regardless of their company, date of joining the scheme, the reason for the wind-up, the date of the wind-up, length of service or age.
THE PENSIONS ACTION GROUP
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The Pensions Action Group is composed of both union & non-union represented employees who have lost most, in some cases all, of their occupational pension through wind-up of their company schemes. Wind-ups can occur when an employer becomes insolvent or when a solvent employer, quite legally, ends the scheme.
These people were in many cases compelled to join their scheme as part of their conditions of employment, and were never warned of any risk by governments, the FSA, OPRA, OPAS, the NAPF or their employers. They were encouraged to join and assured that their pensions were safe, guaranteed and protected by law. Events have shown these facts to be false.
Pension Bill Report Stage, Wednesday 19th May
Paul Gill (of BUSM) has put together the following key points and useful extracts from the debate:
The following quotes are representative, though clearly you will need to read it yourself to form your own view. Note they are in no particular order.
- Milestones / timetable as in the first quote below
- It looks likely we will get over 50% and less than 90% of compensation, much depending on how well the new fund does.
- Earliest payment dates ASAP from April 2005. (November 2005?)
- New fund to consist of £20M/year from HMG, Donations from companies, and existing pension pots.
- This is a hardship/assistance fund, not compensation.
- The April 1997 date is not set in concrete. It could be amended in the Lords.
- Solvent employers are outside the scheme at present but, because of the form of the bill, they can be included at a later stage. We must ALL press for this during the passage through the Lords and during the consultation process. Overall just who is, and is not, included is a little vague.
The full Hansard report can be found here
Malcolm Wicks: By the end of May we shall have established our relationship with key partners, including trade unions, as all levels. Over the summer we will be doing critical work on the design of the scheme so that by the end of November we will be able to consult on regulations. By the spring of next year—just one year away—we will have a scheme in existence, with a view to being able to make the first payments as soon as possible.
Mr. John Redwood (Wokingham) (Con): The Minister says that the figure is £200 million over 20 years, but he also says that he does not know how many people will be affected. If he discovers that many more people are affected, will he increase the sum, and if far fewer people are affected, will he decrease it?
Malcolm Wicks: We are about to publish a report examining the evidence base on that question, and the collection of that data is obviously at an advanced stage. The pensions industry also has an opportunity to contribute more money. As the Government have no legal liability, the word "compensation" is not appropriate—it is an assistance programme—but we feel that there is an ethical duty to act, as well as a need to restore confidence in pensions. I would hope that the pensions industry, too, recognises that responsibility.
Mr. Field: No, of course, I do not think that sum enough. If I had been a little quicker when the Secretary of State for Work and Pensions asked me to withdraw my clause—in fact, it was tabled by my hon. Friend the Member for Sittingbourne and Sheppey—I should have said, "I will do so on condition that you give Government time for the Bill on unclaimed assets that I introduced a couple weeks ago." Of course, £400 million is not enough. If anything, I am critical of the Government coming up with £400 million. Why should our hard-pressed taxpayers, who are earning away, contribute £400 million, when we could use the large sum that has been lying idle, sometimes for 100 years or more?
I make a plea to the Government. It might go down well among Labour Members to say that the industry should make a contribution. If the Government are serious in that, they are in danger of having their sanity tested. We have charged the industry £5 billion a year in extra taxation. If we think that those who have done well by their schemes to ensure that they are not in deficit will now come up with even more funds to keep someone else's scheme going, we are living in cloud cuckoo land. So by all means make that point if we want to make a party point, but please do not be misled by one's own rhetoric into thinking the industry will come up with the money to save us on this one.
Mr. Webb: The new clause is a breakthrough. It is the first time that the Government have accepted that it is legitimate to use taxpayers' money to help people who have lost their pensions. It is entirely welcome and I hope that every hon. Member will support it. I hope the House will note the lack of a "but" at the end of that sentence, although there will be one later.
Mr. Willetts: It is very difficult for the Opposition to estimate the scale of the problem. We have been pressing Ministers about the 60,000 figure, which was offered by the Secretary of State when we asked him for an estimate of the number of people affected. Given that we have hit the limit for public expenditure on this matter, I believe that the only way forward is to increase the financial support for people who have lost out by using the unclaimed assets to which I referred earlier. That is something that the Chancellor specifically referred to in the Red Book this year. It states on page 116:
"Where assets and owners cannot be reunited, it is also right that the assets be reinvested in society, as long as the original owners' entitlements to reclaim are preserved."
The Chancellor has his eyes on that money, and the Irish Government have introduced reforms aimed ultimately at claiming unclaimed assets after 15 years.
The House faces a problem today that is as serious as the problem we faced before. In some ways the problem is worse, because many people think—as a result of the announcement and the amendment—that their problems have been solved. Their problems have not been solved. Therefore, either we need yet further public expenditure or we should use the unclaimed assets, and I favour the latter approach.
Kevin Brennan: Does the hon. Gentleman acknowledge that his calculations assume that all those involved will retire on the same day? The key to the amendment is the ability to take the assets in the pension funds in question and to use them more effectively than simply by purchasing annuities, in order to build a fund. The hon. Gentleman is being slightly misleading in his calculations. As for early-day motion 200, the word "full" does not appear in it.
Andrew Selous (South-West Bedfordshire) (Con): Will my hon. Friend comment on the fact that it is curious that Ballast Wiltshire continues to be able to trade in the Netherlands, despite having so short-changed its UK employees? Does he agree that there is a case for the European Union to look much more seriously at companies that defraud their pensioners in one member state but continue to trade elsewhere in the Union?
Mr. Willetts: The issue first got on to the front pages with Maersk, although that company changed its mind and decided to support the company pension scheme. Maersk would not be covered by the provisions in the Government's amendment, and my hon. Friend makes an important and interesting point.
Bob Spink (Castle Point) (Con): Will my hon. Friend add to his list the Bradstock group, where there was a solvent wind-up that affects many of my constituents? They feel that the Government's treatment of them is terribly unfair.
Mr. Willetts: My hon. Friend gives another good example of solvent wind-ups that are not covered by the Government's new clause. The purpose of the Liberal Democrat amendment is to cover such people and I fully accept that there was a serious omission from the announcement.
Alan Howarth: The hon. Gentleman has indulged in a variety of expressions of sympathy this afternoon. He has indicated that he would not rule out the possibility that it might be appropriate for assistance to be given to the victims of Equitable Life and to the victims of solvent wind-ups. As I agree that there is not the remotest fiscal scope for providing adequate help to all those deserving cases, how is it to be afforded? He suggests that the unclaimed assets will provide what is necessary, but is he not at risk of spending that nest egg several times over?
Mr. Willetts: The House may not face the decision today, but I am sure that as the penny drops about the very limited scale of the Government's announcement Members on both sides of the House will have to decide whether to explain to their constituents, "This is all there is and there is no more", or whether we should aim to do more. I do not claim that we could give 100 per cent., and we certainly need to see the figures. We are still waiting for Ministers to provide them. The money from unclaimed assets that the Chancellor identified in the Red Book would enable us to do more and we could plug a large loophole in what the Government have announced today—namely, the position for victims of solvent wind-ups. That is the proposition that I am putting to the House.
Kevin Brennan: It is vital that the trade unions are involved in the consultations and the setting up and fashioning of the scheme. We must do everything that we can to maximise the value of the remaining assets in the pension schemes that have been wound up or are winding up. We must ensure that the three-year review, which is a key part of the measure, takes place, and the review must act if it finds that the scheme is inadequate and is not providing substantial help.
Mr. Adrian Bailey The news of the Government new clause, presented last week, was wonderful news for those workers. I share that feeling of joy, but I also feel a certain circumspection and concern. We do not know how much there will be and we do not know whether that particular case will fit with Government guidelines. I do not expect the Minister to make a determination on this particular case at this moment in the debate, but I should like reassurance that the representations of the unions, the employees and the members will be taken into full consideration and that we will have a sympathetic response. I do not need to tell the Minister that the worst possible outcome is to raise people's expectations and then to dash them. We would expect the Government response to be consistent with the declared objectives of the proposal.
One final light-hearted point: there is no truth in the rumour that the government introduced the bill to prevent Derek Wyatt MP taking part in a repeat of the “Stripped of our pensions” event on the beach at this year’s Labour Party Conference!
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Report on the meeting with the NAPF, Tuesday 11th May.
|Dr. Ros Altmann
JH. Started by asking CF to explain her change of attitude towards our cause.
CF. She said she had never been opposed to compensation. In a BBC You and Yours interview she had stated that despite our plight there were millions of people who have good pensions and this had been interpreted as opposing our cause. In fact she strongly supported compensation to resolve our case because she felt it was justified and that our claim was causing damage to her industry.
RA. Asked for her prediction as to the outcome of our claim.
CF. She was not prepared to do that. However she felt that our campaign was having great success particularly with media coverage. As a result there was a lot of pressure on the Government to come up with a solution in next weeks third reading of the Pension Bill.
RA. Appealed to CF to use her influence in whatever way she could to persuade the Government, particularly the Treasury, to resolve our claim. She reassured her that the figure of £75 million per annum should be the total bill.
CF. Stated that her organisation had already challenged Gordon Brown on his tax of £5.3 billion per annum on Pension Credits. The response was that it was already committed and that large amounts of money are put into pensions by the Treasury. Her view was that the Treasury should be able to find the money from somewhere i.e. £2 billion per annum is lost through benefit fraud and our claim would represent only two weeks worth.
A survey among her organisation had disclosed overwhelming support for compensation. Of 744 members balloted 90% were in favour of compensation. 80% thought Government should compensate. A general discussion took place between the group regarding compensation.
CF. Stated 100% compensation would be unrealistic. Although compensation existed within the Industry the level was always lower. The new Bill will only pay 90%
JH. Stated that if criminal elements were involved 100% compensation can be claimed. It was made VERY CLEAR to CF that we would not be prepared to accept anything less than our full entitlement: 100% compensation -- 100% Justice!
CF. Announced that the three day annual NAPF Conference would start on Weds 12th May and that Andrew Smith had been invited to speak. The group asked her to maximise on the opportunity.
DA. Offered to attend the Conference and contribute in any way possible. To speak, pose questions to speakers or simply mix with delegates to inform them of our plight. This offer is being considered.
The Pension Group members felt it had been a worthwhile meeting and that it confirms we have a strong ally in the NAPF.
The NAPF press officer subsequently contacted Dave Allen asking if we would like a question put to Andrew Smith on our behalf. He will be asked the following:
”Apart from the financial damage incurred, has the Government considered the social and health implications which this great injustice is causing?”
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Meeting of Samuel Jones Pension Scheme Members with Malcolm Wicks
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Thursday 6th May 2004
This document is compiled from the notes at the meeting with Pensions Minister Malcolm Wicks. They are not intended to be read as the actual minutes of the meeting.
A delegation from the Samuel Jones Pension scheme met with Malcolm Wicks MP the Minister for Works and Pensions, at Richmond House Whitehall
Members of the delegation were:
Steve Searle, trustee and GPMU Union official. (SS:)
Marilyn McDonough, deferred pensioner. (MMc:)
Paul Mason, trustee. (PM:)
Brian Western, pensioner and former administrator of the fund. (BW:)
Alan Marnes, trustee. (AM:)
Also present were
Andrew Bakewell, Independent Trustee for Alexander Forbes Ltd. (AB)
Jonathan Djangoly, MP, for Huntingdon who arranged the meeting for us. (JD:)
A copy of the brief history of the Samuel Jones scheme was given
JD: I have been approached by a number of my constituents re the Samuel Jones pension scheme and asked if there was anything that could been done on their behalf. They were looking for an amendment to the Pensions Protection bill, which was currently going through Parliament, with a view to obtaining some form of compensation for their almost total loss of pension provision. Many felt that part of the current problem stemmed from the present government decision to tax the dividends on pension funds share holdings, this to the tune of £5 billion per year. The proposed pension protection fund is not proposed to be retrospective and therefore will not cover those people whose schemes are already in wind-up.
MW: Dividend was taxed because it was not being used for the right reasons i.e. it was not being re-invested.
SS, MMc, PM, BW, AM, Outlined what pension in wind up of the S.J. scheme means to those who have not already retired. There will be no funds left to pay the deferred and active members at the time of S.J.P's Administration, this is because wind up regulations currently say that existing pensions in payment must be secured by purchasing annuities. Indeed it may be the case that current pensions in payment may not even be met.
PM: Stated that Pensions in payment had been frozen at current levels, therefore pensioners will not receive increases.
AM:The new powers of 27th April state that Parent companies will have to compensate their group subsidiaries that go into liquidation. This is retrospective legislation, why can't this apply to all occupational schemes?
BW: Retrospection in other cases has happened in the past, so why couldn't it be applied to the P.P.S. Most of the problems with scheme wind-ups appear to have happened since 1997.
MW: I am aware of this.
MW Why is the fund so short? (c£15 M)
PM,AM: Described how the fund went from an ongoing healthy state in 1998 to the position we now find ourselves in, mainly due to redundancy settlements and equity investment decline.
SS: Described one serious concern in that he, in his capacity as a trade union representative, had written to the company/trustees regarding the S.J. scheme's ability to pay enhanced pensions and the company’s ability to pay extra contributions to fund these pensions. The Actuary had replied that the company was meeting the cost of the enhanced pensions.
MW: Why did the company go bust?
AM: It was generally thought that the parent company, Rutland Trust. Sold all the profitable parts of the company, then had all of its debt in SJP, then pulled the plug. This debt included a significant debt on the SJ pension fund.
MW: Have you thought about approaching Rutland to make up the deficit?
JD: The S.J. pensioner group in conjunction with the scheme and their legal advisors are pursuing this as a separate issue.
AM: But we as members of the S.J. pension scheme in wind up cannot sit and wait for any possible outcome of pursuing Rutland Trust to make up the short fall in our pension fund. We must make representation to the government to compensate our scheme, plus the 60,000 others in this country in similar situations and address the short fall in pension schemes assets.
MW: We have collated information on a number of schemes including the S.J. scheme. The time is fast approaching when we will have to go to the report stage, but as things stand at the moment the government position remains the same and I can’t offer you anything. I have great sympathy for you and other 60,000 people in this predicament.
AB: Several Pension schemes that his company are acting for as independent trustee along with other pensions professionals, have drafted what they consider to be a workable rescue package for beleaguered pension schemes. This they will forward to the D.W.P. in the next few days.
AM: A number of ideas have been put forward by government policy advisor Dr. Ros Altmann and others, the most favoured one is the use of unclaimed assets to compensate for future pensions provision.
PM Currently these unclaimed assets are said to be around £15 billion, they are sitting in dormant/ untraceable share holdings, bank and building society accounts etc.
MW: The rightful owners could eventually reclaim unclaimed assets and some of Dr. Ros Altmann’s ideas involved the taxpayer paying for compensation. Many ideas were being looked at.
MMc: I’m now too old to make up what I have lost and I'm worried that I may be penalised for being a member of a failed pension scheme, by not being able to claim benefits, I offer a press cutting from a recent copy of the Times news paper, outlining this added injustice to us.
MW. Do the members know what to expect as a pension when they retire?
PM.: Members of the scheme have been written to explaining the dire position of the scheme.
BW: Did the government realise that it would be challenged in the European courts if there was no satisfactory outcome to this situation.
MW: I am aware of the steelworkers union and others taking legal action against the government.
AM: A compensation scheme for pension scheme wind-up was proposed by NAPF in a discussion paper in1992. (A copy was left with MW's secretary) This quoted from Rt. Hon. Peter Lilley the then Secretary of State, emphasising the value of "maintaining faith in the integrity of occupational pension funds". Why have successive governments failed to act on this?.
MW: I am really sympathetic to your case as you, unlike most other schemes, seem to have lost everything except what S.E.R.P's would have provided, I am also sympathetic to people who were with Equitable Life, although I realise that this is a different issue.
SS: People in Equitable Life had a choice where to invest their money. In some occupational schemes cases, people were compelled to join their company pension scheme. At S.J. we had a choice; all the advice from Government, the pension industry and even Trade Unions was that you could not beat a guaranteed company final salary pension scheme. They said if your company had one, go into it.
BW: Is there anything positive that we can take away from this meeting to tell our members?
MW: You can tell them that we are looking at a number of options but that we do not want to raise false hopes. Although you have my sympathy I must emphasise that the government position remains the same. In the very near future we will again be reporting to Parliament on this issue.
SS: As a trade union official and Labour supporter I cannot believe that this is happening under a Labour Government.
AM: Nobody warned us there was risk in occupational pensions; the words guarantee and assurance were used regularly.
SS: We don't know of anybody from our scheme that has the confidence to invest in alternative pension provision since the demise of our occupation scheme.
AM: Had we been civil servants, farmers, railway employees pre privatization or indeed politicians we would not be in this position now, we the 60,000+ implore you to do the right thing by us, please listen to your professional advisors like Dr. Ros Altmann. Then and only then, will we that are working in the private sector, have the confidence to invest in pensions once again.
AM: Please call a halt to the wind up of pensions schemes, because if they continue the only people that will benefit are the share holders of the insurance companies, who are providing annuities. They don't do this for our benefit, they are only using these funds as a vehicle to make more profits for themselves. These pension schemes were set up to provide for employees pensions. Pool these funds. Do it now as potentially, every day that passes, more and more public money will be needed to put this problem right.
AM: Along with the 60,000+We have lost years of funding opportunity this we can never never get back...
All thanked Malcolm Wicks for seeing our delegation and Jonathan Djanogly for arranging this meeting on behalf of all the members of the Samuel Jones Pension Scheme.
Personal profiles were left of several members of the scheme. These included
Mr. Peter Smith (sales), Mrs. Marilyn McDonough, Mr. Alan Marnes.
Press Release from ISTC and Amicus
Pension justice is affordable say unions
Amicus and ISTC unions say new figures show that pension justice is affordable.
Work commissioned by the two unions from an independent pension actuary and a leading pension expert, estimates that compensation should not exceed £76m per annum over 30 years and may be as low as £50m a year over the same period, falling significantly below all previous estimates.
Amicus and the ISTC say the figures show that the government can afford to compensate workers who have been left without all or substantial parts of their expected pensions when their companies have become insolvent.
Derek Simpson, General Secretary of Amicus, said:
“The Prime Minister’s statements on our campaign in the last two Prime Minister’s Question Times have been welcome and encouraging news. The Government know that restoring our members expected pensions is the right thing to do and our figures show that it is affordable too.
“The thousands of people who have paid their pension contributions throughout their working lives deserve to enjoy their retirement free from financial stress.”
Michael Leahy, ISTC General Secretary, said:
“Bryn Davies & Ros Altmann’s research for the ISTC & Amicus, which we have sent to the Prime Minister and relevant Cabinet Ministers, suggests that the cost of restoring the expected pensions of those formerly employed by ASW, and thousands like them, is substantially less than previously estimated.
“£76m a year over 30 years is a small price to pay for restoring confidence in the UK pensions system and lifting the threat of hardship in retirement from thousands of people who were told their pension was safe, only to have it snatched away from them when their employer became insolvent. I urge the Government to now introduce their own amendment to the Pensions Bill by its 3rd Reading or face the prospect of Labour backbenchers moving their own, which we would expect to be backed by all the other political parties.”
The Prime Minister said during the last two Question Times that the Government are examining the cost implications of compensation for the thousands of people affected in companies such as ASW, UEF and Dexion. He has indicated that the Government will be ready to make a positive announcement during the course of the Pension Bill.
Labour MPs, led by Kevin Brennan MP, have stated that if no such amendment or firm proposal is announced by the Third Reading of the Bill, expected to be later this month, then they will table their own amendment to restore the pensions of those who lost them through employer insolvency.
Amicus and the ISTC are currently taking legal action for the failure of successive UK Governments to properly implement a European Directive on insolvency, making them liable to compensate workers who have lost out through no fault of their own. If the issue is not dealt with in the Pensions Bill and the legal action is successful the Government will be liable for compensation in one lump sum rather than spread over 30 years.
Notes for Editors:
1. £14 billion of pension tax incentives are paid every year in the UK. 50% of this amount is paid to the top 10% of earners
2. Government compensation for farmers who had to slaughter herds over CJD and mad cow disease amounted to £300m per annum.
3. ISTC – the Community Union and Amicus have issued a High Court claim on behalf of 1,000 pension scheme members of Allied Steel and Wire Ltd (ASW) from Cardiff and Sheerness who lost the bulk of their pensions when the company was declared bankrupt in 2002, leaving two pension funds in deficit.
4. Article 8 of the Insolvency Directive reads:
“Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes.”
5. 298 MPs of all parties – including over 200 Labour MPs – have now signed Kevin Brennan MP’s EDM 200 calling for the Government to restore the expected pension benefits for those who have lost them due to employer insolvency.
* * * * * * * * * * * * * * * *
Amendments to the Pension Bill
* * * * * * * * * * * * * * * *
Following the committee stage, amendments are tabled for the report stage (third readng) of the bill.
The two amendments below have been tabled so far. An amendment will also be tabled by Kevin Brennan if there is no government action prior to the third reading.
Amendment proposed by Derek Wyatt:
The Secretary of State shall within 3 months of this Act receiving Royal Assent
(a) lay before both Houses of Parliament proposals for legislation to introduce a compensation scheme for certain members of occupational pension schemes who are not covered by the Pension Protection Fund and as may be defined by regulation and
(b) report on ways such a compensation scheme may be financed.
Derek Wyatt, Frank Field, David Willetts, Nigel Waterson, Adam Price, Annabelle Ewing, Martin Smyth, Jeffrey Donaldson, Sandra Osborne
Amendment proposed by Steve Webb:
(1) The Regulator shall provide the Secretary of State with a copy of a list of members of occupational pension schemes ("the List") which meet the conditions in subsection (2).
(2) A scheme whose members shall be eligible to be included on the List is one which-
(a) commenced winding up after 5th April 1997, and
(b) whose members would have been eligible for pension compensation from the Board of the Pension Protection Fund if the scheme had begun winding up after the day appointed for the purposes of section 113 (2) (eligible schemes).
(3) The Regulator shall have the power to require trustees of a scheme
which meets the definition in subsection (2) to write to each member of the scheme to advise him of the existence of the List, and of how to apply to have his name included in the List.
(4) Trustees of a scheme which meets the definition in subsection (2) must provide such relevant information to the Regulator as he may require.
(5) The Regulator shall add to the List the name and address of each scheme member who would have been eligible for pension compensation from the Board of the Pension Protection Fund if the scheme had commenced winding up after the day appointed for the purposes of section 113(2) (eligible schemes).
(6) The Secretary of State shall be required to provide financial assistance to each person on the List.
(7) The amount of financial assistance payable to a scheme member under subsection (6) may be prescribed in regulations but shall not be less than the amount to which he would have been entitled if the scheme had qualified for pension compensation from the Board of the Pension Protection Fund.
The amendment was accompanied by the following statement from Steve Webb:
"Rather than put a long list of Lib Dem names on the amendment we have deliberately put only one name so far (my own) to leave room for other MPs - ideally from other parties - to add their names and confirm that this is not just a "Lib Dem" amendment, but truly an all-party one. We are determined that the injustices that so many workers have suffered should finally be put to an end, and we hope that this New Clause might prove the focus around which we can all rally."
Yahoo Group E-mails
Quite a few people have spoken to me about problems receiving group e-mails of late. I have e-mailed Yahoo about these difficulties and have, alas, received no reply. Unfortunately I have no technical control over how the service operates, but the observations below might be useful:
The problems seem to start if Yahoo cannot deliver a message to you. Possible causes for this are your mail box being full, (something I have to watch), or your service provider applying severe spam filters or your employer, (if you are using a works address), blocking floating addresses such as Yahoo or Hotmail to stop Internet abuse.
The two virii Netsky and MyDoom are also causing problems with sheer volume of e-mail (over 50% is now junk) and it is possible that Yahoo may be having over-runs. I do know that group e-mails are a low level service so it is possible that we get affected by the volume of rogue e-mails.
I have been told that doing an unsubscribe then a re-subscribe has worked, i.e. blank e-mails to:
then in an hour or so send another to:
If you think you have missed any messages you can always view the group e-mails (albeit without attachments) at the group web address:
Note this is not the same as this www.pensionstheft.org site
If you are going to be away from home for a few days you can go to the Yahoo group website and turn off the e-mail forwarding whilst you are away. Set your membership to "web only". You can restore it when you return.
It may be worth setting up Yahoo or Hotmail addresses to receive group e-mails in addition to your home address. On the main Yahoo page go to Mail and follow the instructions to start a new e-mail address. It costs nothing and is actually very useful as you can use it from any PC in the world with Internet access.
When you have set up the floating address send a blank e-mail to the subscribe address to start receiving group e-mails.
I am very much a novice in this field and I would welcome any comments from people with more experience.
* * * * * * * * * * * * *
Amicus Pensions Survey
The trade union Amicus have conducted a survey on people’s attitude to pensions and how the government is handling the situation. The survey was conducted by an independent company in accordance with the code of conduct of the Market Research Society. There are 95% confidence limits of +/- four percentage points, i.e. taking the first point below it is near certain that between 79% and 87% of people feel that pension income should have legal protection.
1) 83% of all respondents feel that pension income should be legally protected; this is very close to the 81% of people in the NAPF survey who think the government should pay our lost pensions.
2) Over three quarters of respondents (77%) feel that the government is not doing enough to protect people’s pensions.
3) Nearly a half (45%) say that the government handling of the pensions problem could affect their voting at the next election.
4) Half of the respondents say that they do not trust any of the political parties to protect their pension. A further 28% are undecided. Only 13% trust Labour and 6% trust the Tories
5) 88% of all respondents feel there should be a legal obligation for employers to consult employees about changes to their occupational pension schemes which could reduce their income in retirement.
6) 72% of all respondents feel that employers should contribute to employees' pensions.
7) Just over 10% of respondents said they were unaware of any plans to increase the retirement age to 70, whilst 41% said that they thought it to be unreasonable. Just over a third thought it was fair, or that people lived longer so they need to work longer. 18% said they thought it unfair to change the rules for existing savers.
* * * * * * * * * * * * * * * * * * * * *
Meeting with Andrew Smith, 30th March 2004
* * * * * * * * * * * * * * * * * * *
Attendees; Julie Kirkbride MP, Ros Altmann, Micky Ball UEF, Willie Riggins UEF, Peter Wheeler Kalamazoo.
The meeting started with Micky Ball and my self explaining our particular circumstances regarding our pensions failure. I went on to mention that had I been aware of the risks I would not have left my pension in a company I believed would go into liquidation. I explained that we had met with trustees of the Kalamazoo pension scheme in 1997 to seek assurance that our pensions were safe as the company had just sold the division I worked in and I had become deferred. The trustees had said that the pensions were protected in law and that our pension would be there when we needed it.
Ros Altman went on to show the minister a communication from within the DWP which highlighted the risks and that there should be disclosure to members of these risks. She also showed him several leaflets from government bodies outlining the virtues of being in company pension schemes and the use of the word ‘guaranteed’. The minister seemed very interested in these and requested copies.
The minister said it was a great misfortune and that the government was examining the issues and compiling the evidence and that they were establishing the PPF so that this would not occur in the future.
The question of compensation was raised and the minister said that we need to be cautious in using the word ‘compensation’ and that perhaps discretionary assistance might be a more appropriate term. He implied that these pension schemes were after all private pension schemes and the government could not be used just to nationalise the risk. He questioned how we would draw the boundaries of who to assist and mentioned perhaps just helping those over 50 for instance. We said that we believed that would be unacceptable; that it was not for us to draw boundaries and that everybody who had lost pensions should be compensated.
The costings were briefly mentioned. 93 million pounds for 50 years was after all a lot of money. He wondered whether a more imaginative way of funding the assistance could be found. For instance, a broader public responsibility and perhaps help from the financial services industry.
Julie Kirkbride mentioned that the Conservatives supported Frank Fields suggestion to use orphaned accounts but he argued that all sorts of people would ‘come out of the woodwork’ claiming money for worthy causes. She said that this was a worthy cause.
He reiterated his much parodied phrase, that he didn’t want to raise false hope, but that the government is trying to find a solution.
He did come across as sincere and all attendees believed that the meeting was of great use.
After the meeting I asked Julie Kirkbride if she could arrange a meeting with a delegation from Pensionstheft with Michael Howard and she said she would ask the question.
Thanks yet again to Ros Altman for her continued devotion to our cause.
Peter Wheeler Kalamazoo
A little song and verse:
The Pensioners' Lament, a song for Gordon & Tony
by Paul Gill, ex BUSM
To the tune of Land of Hope and Glory. Best sung 25th March.
Britons hear our story
like the Jarrow Marchers
Lloyd George knew my father
a great man was he.
pensions for the workers
place in history.
Malcolm's false hope story
pensions promise 3
Britons never should be
ruled by men like he.
Come on Tony listen
to our humble plea
common sense and vision
Tony are you listening?
Gordon can you see?
robbing us of pensions
damned by history
* * * * * * * * * * * * * * * *
Prime Minister Pension Plea
by Barry Tillson, Perivan
We just want what's rightfully ours, Mr Blair
Don't turn your back on us all without a care
For we have been loyal workers all our lives
We deserve our pensions to share with our partners and wives.
Don't strip us of what is rightfully ours....be fair
We just want our pensions please Mr Blair!
We did everything by the book
But you don't seem to give us a second look
Do the right thing Tony in Parliament give us a mention
How would you feel with little or no pension?
Give us all compensation now and let justice be done
Don't put our families through this hell.. for it's no fun.
Wake up now Mr Blair - compensate us all today
for this problem won't just go away.
If you ignore our pleas we will be back to fight,
don't rob us of our pensions - you know it can't be right.
Regain our faith in Labour and you will get our vote
Ignore our plight and you will surely miss the boat
* * * * * * * * * * * * * * * * *
Amicus & ISTC Notes for people who are going into the House of Commons to Lobby their MP.
These notes were drawn up prior to the demonstration for the second reading of the Pensions Bill. They are still a very good source of points and questions to discuss with your MP. Remember, you can visit Parliament and lobby your MP at any time (they have to see you), although practically it is better to arrange a meeting in advance.
State your case history.
Ask your MP to write the Secretary of State Andrew Smith and the pensions Minister Malcolm Wicks stating your case and ask them to copy the letter to you.
- Years of service and your age
- What pension you did expect to get
- What pension you have been told you will get
- Tell the MP how many in your work place have been affected
- When and how your company announced and went into wind up
- If you know the figure surrounding you fund, tell them
Ask your MP if they have signed Kevin Brennan’s Early Day Motion (EDM200) on occupational pensions and if they haven’t urge them to sign it.
EDMs act like petitions and press the government to think seriously about the issue, the more signatures the better; it currently stands at 250 signatures.
Would they support an amendment to be tabled by Kevin Brennan, which would see existing assets that have not been used to buy annuities be brought in to the pension protection fund PPF and use to pay pension as and when they become payable? And a second amendment to set up a compensation clause to give assistance to people whose fund has been fully wound up and annuities have already been bought?
Other amendments we would like to see to the Bill would include clauses that would have consultation and compulsory Membership with minimum contributions for both employers and employees.
First to query the omission of consultation following the commitment given in the 'White Paper' Action of Pensions last summer,
Second to point out that employers are commonly announcing without any prior consultation increases in the level of employee contributions of 2-3% which immediately reduce employees pay or, if they do not agree, leave them with no benefit going forward - or alternatively announcing changes in retirement age of the rate of accrual going forward which can reduce the value of future pension being earned by 25%.
Third to argue that such unilateral changes are unacceptable and highlight a major gap in employment protection
Complain about the pension increase cap of 2.5% or limited price index (LPI). Also ask why, out of £14billion of pension tax relief, 50% of it goes to the top 10% earners in this country
[Andrew Parr additional note: Emphasise that nobody warned you of the risk you were taking with your occupational pension, and everything you had heard from the government, DWP, NAPF, OPAS, OPRA, your employer etc. had implied your pension was protected by the 1995 Pensions Act]
* * * * * * * * * * * * * * * * * * * * * *
Second Reading of Pensions Bill, Press Release from ISTC and Amicus
Union members from two trade unions from the former ASW steel company in Cardiff and Sheerness will stage a lobby outside the Houses of Parliament at 12pm (midday) on Tuesday 2nd March.
The members of ISTC and Amicus formerly employed at ASW will be lobbying Parliament and seeking to meet with their MPs on the day of the 2nd Reading of the Pensions Bill. They will be making it clear to MPs of all parties that confidence in the UK pensions system will not be restored unless they, and people such as them, who lave lost their expected pensions through no fault of their own, are compensated.
The ex-ASW employees will thank 240 MPs who have signed EDM 200, tabled by Kevin Brennan, Labour MP for Cardiff West, calling for the Government to provide compensation for people such as them.
The ASW pension scheme members will be drawing to MPs attention the legal action that the ISTC and Amicus are taking against the UK Government for failure to properly implement the European Insolvency Directive, which obliged them to protect workers pensions when their employers are declared insolvent.
The ASW scheme members will argue that this means that the Government is likely to have to pay for the shortfall in their pensions and try to convince MPs to resolve this via the Pensions Bill rather than through the Courts. Should the Government not admit its responsibility to the ASW pension scheme members, and others like them, the ISTC and Amicus will be urging MPs to support an amendment that will be introduced during the passage of the Pensions Bill to provide compensation.
Commenting, Michael Leahy, ISTC General Secretary, said:
“The ISTC and Amicus are determined to get justice for our members who were in the ASW pension scheme and that is why we shall be lobbying Parliament on 2nd March. The message for the Government is clear: confidence in the UK pension system will only be restored if the ASW pension scheme members, and others like them, are compensated.”
Derek Simpson, Amicus General Secretary, said:
“Amicus members at ASW, and other companies such as UEF, were told that their final salary scheme was secure but now they’ve lost almost everything. Successive British Governments have failed to adequately implement a European law that would have prevented this and, whilst we welcome the Pension Protection Fund, those who have lost out must be compensated.”
1. ISTC and Amicus have issued a High Court claim on behalf of 1,000 pension scheme members of Allied Steel and Wire Ltd (ASW) from Cardiff and Sheerness who lost the bulk of their pensions when the company was declared bankrupt in 2002, leaving two pension funds in deficit.
2. Article 8 of the Insolvency Directive reads:
“Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes.”
3. If successful the case, which is being taken to the European Court of Justice, will set a precedent for thousands of other workers who have lost pension benefits when their employers have gone out of business. This will include, the former workers at United Engineering Forgings Ltd based in Ayr, Chesterfield and two other locations, which went bust in 2001, leaving its pension fund in deficit.
4. The case is likely to be heard in the High Court in the first half of 2004, at which point Counsel for the unions will request that it be transferred to the European Court for a hearing at the earliest possible date.
5. ISTC and Amicus are supporting Kevin Brennan, Labour MP for Cardiff West, who has pledged to table amendments to the Pensions Bill, to provide for compensation for his constituents who were members of the ASW pension scheme. The unions have provided a “Bill Team” for Mr Brennan to draft an amendment and will be urging MPs of all parties to support it.
6. Interview and photo opportunities will be available for the media from 12pm, Tuesday 2nd March on College Green
* * * * * * * * * * * * * * * * * * * * * *
The following exchange of letters took place in the Financial Times from 16th February 2004:
From Mr H. R. Wynne-Griffith.
* * * * * * * * * * * * * * * * * * * * * *
Once again the government, in seeking to find a quick answer to difficult pensions issues, has come up with the wrong one with its proposed new Pension Protection Fund.
There is risk in all that we do and that applies to pension schemes just as much as to any other aspect of our lives. It is wrong of the government to seek to remove all risk from the shoulders of employees in final salary pension schemes and yet leave the very same risk (although manifested in a different way) to be borne by those employees who are in money purchase pension schemes (and they will soon form the majority).
The government wants to shift to employers the full risk for employees in final salary schemes while offering no protection whatsoever to employees in money purchase schemes. Why this imbalance? What have those employees done wrong to have been so cruelly ignored? Surely all employees should bear some risk - regardless of the kind of scheme they are in? The proposed Pension Protection Fund should be redesigned.
It is, of course, a tragedy that up to 30,000 people have had their pension expectations reduced but the greater catastrophe is that bad pensions legislation (from all recent governments) is now threatening to leave millions with lower or no pensions in future (except for MPs and state employees, naturally).
Knee-jerk legislation in reaction to examples of life's unfairness always back fires. This happened with the post-Maxwell legislation and so it will with the Pensions Protection Fund. Will politicians never learn?
H. R. Wynne-Griffith
From Dr Ros Altmann.
The tone of Huw Wynne-Griffith's letter (February 16) is breathtaking. Perhaps actuaries always knew that contributions to final salary schemes were not protected, but the members certainly had no idea.
Members were told that their accrued pension rights were protected in law and that actuaries would calculate contributions, in line with the minimum funding requirement, to ensure adequate funding to pay the promised pensions. Literature from the government, the Financial Services Authority, the Occupational Pensions Regulatory Authority and everyone else contrasted the safety of final salary schemes with money purchase arrangements, where members' pensions were not guaranteed.
Simply to say it is a tragedy that thousands of people have had their pension expectations reduced is an insult to those who have suffered in this way. This is not an example of life's unfairness; this is more like fraud. Other victims of mis-selling receive compensation. Having contributed their money loyally for 30 or 40 years, with the promise of a secure pension and no risk warning from anyone, many now find not that they will get a reduced pension but that they will get no pension at all. Even worse, their state pension will be reduced too, so they would in fact have been better off throwing their contributions away, than putting them into their employer's schemes. Is it any wonder that people are frightened of pensions and have lost confidence?
If we want individuals to save for their old age, we must offer them more protection. A minimum level of insurance is essential for employer schemes. Rather than criticising moves to improve safety, Mr Wynne-Griffith would do better to lament the lack of protection for money purchase pensions and encourage more security for these too. I do hope the rest of the actuarial profession is more concerned about the interests of scheme members than Mr Wynne-Griffith appears to be. After all, surely the purpose of pension funds is to pay pensions.
Ros Altmann, Governor, London School of Economics, London N3 3EE
Press release from Kevin Brennan MP
* * * * * * * * * * * * * * * * * * *
Date: Thursday 12th February 2004
Pensions Bill must compensate ASW victims says MP
Reacting to the Pensions Bill published today, Kevin Brennan, Labour MP for Cardiff West – many of whose constituents lost the bulk of their pensions when Allied Steel and Wire Ltd. (ASW) became insolvent in 2002 - said that the Bill needed amending to provide compensation for the ASW victims and people in a similar situation. Mr Brennan confirmed that, if the Government did not introduce such an amendment during the passage of the Bill, he had been working the ISTC and Amicus unions “Bill Team” to draft such an amendment.
Commenting, Mr Brennan, said:
“There are many things to welcome in the Pensions Bill, which begins to right some of the wrongs perpetrated by the last Tory Government during their 18 years in power. The proposal to establish a Pension Protection Fund (PPF) to protect the pension benefits of employees in company pension schemes in the event of their company becoming insolvent is one that I know my constituents will welcome.
“However to restore faith in the pensions system I believe that we must provide compensation to my constituents who were members of the ASW pension scheme. As I listened to them describe the shattering effects of not only losing their jobs but also the pensions that they were told were guaranteed I have thought, would I allow it to happen if this was my dad? Of course I wouldn’t and nor do I think Ministers.
“239 MPs of all parties – including over 155 Labour MPs – have signed an Early Day Motion (EDM 200) I have tabled in support of compensation for the ASW victims, who lost their expected pension through no fault of their own. This is one of the largest numbers of signatories for any current EDM and I am glad of the support that I have received from colleagues on all sides of the House with little or no lobbying by me or by unions. This is an indication of the strength of feeling that this issue raises with MPs from every party, and I expect that more will sign it in the next few days.
“I hope that the Government will recognise this and address the issue during the passage of the Bill. If they don’t, I can confirm that I have been working with the ‘Bill Team’ arranged by the ISTC and Amicus unions to draft an amendment to provide compensation which will be tabled in due course.”
2nd Reading of the Pensions Bill
22th February 2004
DWP press release can be found here.
* * * * * * * * * * * * * * * * * * *
When John Benson, ex ASW Cardiff, handed in the petition to the Welsh Assembly on 4th February, Rhodri Morgan, the leader of the Welsh Assembly, refused to accept the petition personally, and gave the press release below. The petition was handed to the Assembly via the Plaid Cymru assembly members
Rhodri Morgan statement on unofficial ASW protest
Cardiff West AM RHODRI MORGAN said:
"The situation facing the ex-employees of ASW with regard to their pension rights is an absolute tragedy. As the full enormity of the situation emerged I met with members of the !STC and Amicus unions to listen to their fears at first hand.
"I have written to Andrew Smith MP, the Secretary of State for Work and Pensions, urging him to find a way of providing compensation to the ASW pension scheme members. Confidence in company pension schemes has taken a huge knock and needs to be restored. Following recent correspondence with the ISTC, I am again writing to Mr Smith urging him to use the opportunity of the forthcoming Pensions Bill to right this wrong. I and the Labour Group of AMs hope that he will take that opportunity.
"I know that the ISTC and Amicus have begun legal action against the UK Government on behalf of their members at ASW - including Mr Benson. I hope that it won't come to that, but they are clearly right to explore every possible route to secure and restore decent pensions in retirement for their members.
Backing ISTC calls for former workers of Allied Steel and Wire to be compensated for losing their pensions, Cardiff South and Penarth AM LORRAINE BARRETT said:
“I fully support the ISTC and former workers' campaign to be compensated for losing their pensions. Many of these workers lost their final salary occupational pensions schemes despite being promised that their pensions were guaranteed. We must maintain the pressure to get compensation for the former workers who have been stripped of their pensions through no fault of their own."
* * * * * * * * * * * * * * * * * * * * *
Open Letter to Tony Blair
Many letters have been written to Number 10 but these invariably are bounced on to the DWP. Jacqui & Peter Humpreys have now written an open letter to Tony Blair which was printed in the Daily Telegraph on Saturday 10th January; the day we closed Oxford Circus. It will be interesting to see if an open letter elicts any response:
Dear Mr Blair . . .
In an attempt to get your personal attention after failing on numerous occasions by letter we make this open letter approach to you.
Hopefully you are aware of the current dilemma that many of this action group find ourselves in, due to no fault of our own but to flaws in pension legislation.
In summary, many of us find that after loyally serving our individual companies for 25 to 45 years and contributing to what were often compulsory final salary pension schemes, we are now left fighting for compensation due to these companies either selling out, being placed into receivership or liquidation and putting our pension schemes into wind-up.
Without any warning we suddenly find we are left with much reduced expectations of our hard-earned pensions, and in some cases we are told we may get no pension at all - not even our Guaranteed Minimum Pension.
We have been actively involved in campaigning for compensation, talking to your ministers Andrew Smith and Malcolm Wicks, both of whom say they are willing to listen to "sensible suggestions" without promises. We can understand why no promises can be made to finance schemes that are being wound up, but we fail to grasp why this Government cannot introduce some "sensible" interim legislation that would allow a period of thorough analysis.
The biggest and most immediate worry for us going through this trauma is that our contributions are being used to buy annuities for current pensioners. This is a point that Dr Ros Altmann, governor of the London School of Economics, has made on many occasions, as have leading financial editors in much of the UK press.
We ask you why this cannot be stopped, either by government instruction or by immediate legislation in the forthcoming Pension Bill. This would allow our money to remain in our pension schemes for now, while the Government considers the possibility of compensation.
If we are no longer forced to buy annuities, it is obvious that much of the panic would be removed and perhaps then precise financial modelling could be done for each scheme that is going through the wind-up process.
Clearly the purchase of annuities is draining what cash is available and those of us close to retirement are feeling helpless while insurance companies benefit at the expense of others. This would cost the Government nothing and current pensioners would not be affected.
If the Government were to stop the compulsory purchase of annuities, it would show us that you are facing up to this issue. This would take a lot of pressure out of the system and protect the cash that is within these schemes. If you are then able to agree to compensate us in the future the fact that most of the cash would not be in annuities may mean that the corrective bill is far less than it would otherwise have been. In addition you would claim the moral high ground and that is what we would expect from a Labour Government.
It seems to us, therefore, that Dr Ros Altmann has provided you with a "sensible suggestion" and it is one that will not cost the Government anything until the full financials have been completed. Surely it is time to find out how much this problem will cost to fix. The longer you allow annuity purchase the bigger the potential bill will be.
The Pension Action Group
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The Actuary’s Big But
A modern story in two acts
You must put 5% of your pay into the pension fund
It is safe, in fact we are proud of it
It is a condition of your employment here so you have to join
The Government rules won’t let you join another fund
The Company has put nothing into the fund for years because the actuary says it is OK
The actuary says that the amount of money in the fund is enough to pay all the pensions.
Sorry, the company has gone bust
Sorry, this means the fund must be wound up
You said the fund was separate and that it was safe
I forgot to mention that the actuary has a big but
What do you mean?
Well, the rules change when the fund is wound up
What do you mean?
Well the people who are already retired must be looked after first and as the fund can’t continue we need to go and buy them individual pensions on the market.
So what, this sounds quite fair
Yes but there is a big but coming up.
What, you mean the actuary’s big but?
Yes, its really big
Go on then tell me.
He says that buying these pensions on the market costs twice as much as he allowed for when he was giving the company a contribution holiday BUT the rules allow this.
BUT THE RULES ALLOW THIS?????
Yes, and you pay because the fund will have no money left when the pensions have been bought
You mean I get no pension?
If you have heard of the stuffer and the stuffee in business, you will realise that the Government and the Actuaries are in the former category and you are in the latter.
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Statement from Derek Wyatt MP 23rd December 2003
Derek Wyatt, Labour MP for Sittingbourne and Sheppey, was the first MP to grasp the awfulness of Occupational Pension schemes going into Administration through one company in his patch - ASW Sheerness - which went into Receivership in the first week of July 2002. He has worked with the ASW Pensions Group, as well as trade unions including ISTC and Amicus, the CBI, the Institute of Directors and the British Chamber of Commerce to try and find a solution. ASW Sheerness have had meetings with No.10, Ian McCartney MP and Andrew Smith MP. Together we have marched up Whitehall twice. Together we have built a national campaign culminating in two very different activities - the "Stripped of Our Pensions" day at the Labour Party Conference and the cross party Pensions Summit on 4th November 2003. Both received widespread national and international media coverage.
Here is his assessment of where we are:
The Proposed Pensions Bill
Q. Who will pay the insurance premium?
A. The industry and/or the purchaser. Maybe that's why the CBI/IoD and CoC aren't happy bunnies.
Q. How much will it be?
A. Don't know; waiting for figures to be published.
Q. Will it be retrospective?
Q. When will it be introduced in the House?
A. Soon - January is a difficult period for the Government with the Hutton Report and subsequent reaction taking at least a week; then there is the small matter of Top Up Fees which may or may not be introduced after Hutton but let's assume that's a Yes then that means it is unlikely the Pensions Bill will happen before the first week of February.
Q. Could the Government introduce the Bill in the House of Lords first?
A. They could but they couldn't risk a defeat at Second Reading.
Q. Will there be amendments made at Second Reading to cover the (ASW and others) compensation issue?
A. There could be but if these were defeated at this stage we'd all be pretty upset; it's best to do this at Committee Stage.
Q. How do I find out more about what a Second or Third Reading is and even what a Committee Stage means?
A. You can go to the parliament web-site and you'll see explanations there; you can write to the Education Department at the House of Commons, London SW1A 0AA and they will send you information; you can also ask your own MP.
Q. Who selects the MPs who sit on the Committee Stage?
A. Good question - the Whips of the main parties.
Q. Have you applied?
A. I have but that's not a guarantee.
Q. What are our best options to make sure some kind of payment is made to those whose Occupational Pensions are in Administration?
A. Campaign like fury; we now need to work out a schedule of activities between now and the Second Reading and I will be talking to the ASW Pensions Group shortly; I know there is a march planned for 10th January 2004 in Oxford Street.
Q. What about the court case regarding EU legislation?
A. Amicus and the ISTC trade unions are confident they will win. Time is an issue as it is likely to take two further years unless the Government concedes.
Q. Can you think of a solution to this thorny issue for the Government?
A. Dr Ros Altmann has been acting as an unpaid advisor to many of us and she has put forward a number of solutions which have been well documented; Frank Field MP has also suggested in his Private Members bill looking at Orphan/Unclaimed Funds; I have suggested that the Government's sets up a National Occupational Pensions Fund for those Pensions in Administration between 5th April 1997 and 5th April 2005.
Q. Any other avenues that could explored?
A. My instinct at this moment is that if I was Andrew Smith MP and I was going to put this Bill on the Statute book then I could not afford to ignore the 200 odd schemes in Administration even though these are not, (except in Northern Ireland), government schemes and so there is no legal liability (the current court case notwithstanding) though there is a moral issue at stake. The neatest solution therefore would be to announce more or less immediately the setting up of an Inquiry into these Occupational Pension Schemes led by a Judge or an Eminent Person from the City with the remit of finding out 1) How many schemes are in trouble? 2) What would be his/her recommended solutions to pay compensation? This report might take 8-12 months to publish its findings but at least we would then know the scale of the issue and the recommendations for finding compensation. Compensation would then be payable on the same date that the new Insurance Act came into play i.e. 5th April 2005.
Q. Is there cross party support for retrospective compensation?
A. There is much talk; Steve Webb of the Lib Dems has made several appeals for cross party support for a solution without favouring a particular solution; the Tories have not committed themselves to retrospective payments; the Government is keeping its cards close to its chest.
Happy Christmas everyone; well done everyone for what you have done so far BUT the next two months will be critical so we need you to put as much pressure on your local MP as possible.
Keep up the fight.
Derek Wyatt MP
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A group from ASW & Dexion had a meeting with Andrew Smith on 9th September. After the meeting the following common letter was sent to Tony Blair
Dear Mr Blair
During Prime Minister's Question Time on l2th February you stated, in reply to a question from Kevin Brennan MP about ASW pensions, "We will do our best to help him resolve the particular case that he raises". On 17th September you replied to Jim Dobbin MP in respect of pensions at Lister Yarns stating, "I will look into the issue that my hon Friend raises very carefully".
It was recently announced that a pension insurance scheme will be introduced in 2005 and the inequitable statutory order imposed by the 1995 Pensions Act will be revised. Restrictions have also been placed on solvent employers who wish to close their pension schemes. Welcome as these measures are, they bring no consolation to those who have already lost their pensions despite following - and trusting - government advice.
On Tuesday, 9th September we visited Rt Hon Andrew Smith MP to discuss the wind-up of pensions schemes at ASW and Dexion. During our meeting we handed over proposals from pension expert, Dr Ros Altmann, which show how compensation in respect of our and other similar cases could be paid at minimal, possibly zero, cost to the government.
In view of your re-assurances on 12th February and 17th September, we trust you will instruct the Department of Work and Pensions to adopt these proposals as soon as possible.
We would also request a meeting with you so we can explain our plight in detail.
Andrew Parr, John Hayter, John Benson,
Patricia Sargent, Peter Humphrey, Brian Selwood
We received a fairly quick standard reply saying that Mr. Blair was abroad saving the country and our letter had been passed to the DWP. On 1st December 2003 we received the following reply from pensions minister Malcolm Wicks.
Letter from Malcolm Wicks
Thank you for your letter of 19 September to Tony Blair about occupational pension schemes, such as ASW and Dexion. The letter has been passed this Department for reply and I apologise for the delay in responding.
In your letter, you refer to proposals provided by Dr Ros Altmann to Andrew Smith during a meeting at this Department in September. You have indicated that Ms Altmann's proposals would mean minimal, possibly zero, costs to Government, whilst providing compensation to members of schemes such as yours. In the light of this, you have asked the Prime Minister to instruct the Department to adopt Ms Altmann's proposals.
The Prime Minister is, of course, aware of the position of ASW and Dexion workers, and would like to emphasise that we are concerned about the situation in which you find yourselves. Ministers do appreciate that the situation must have come as a tremendous blow to you - believing that you were making provision for your retirement, only to find that your expectations will not materialise.
However, I must emphasise that the issue is a sensitive one and there are compelling arguments on both sides. Some, if not all of you, may have attended the meeting on 4 November in which I set out the reasons why the Government needs to consider very seriously whether compensation should be made available in this situation. I appreciate that some compensation estimates may appear relatively small on first sight. But if a package was made available, it would surely need to include anyone whose company becomes insolvent between now and the start of the Pension Protection Fund. Given that the Government has little control over the number of companies that will become insolvent between now and then, the compensation estimates could be significant when they do materialise. And whilst the vast majority of companies who offer occupational pensions do honour their pension commitments, some could leave their pension bill for someone else to collect, which will further increase any compensation costs. We therefore need to give serious thought to whether any compensation package could create perverse incentives for companies.
There is also the issue of whether compensation could result in a subsidy from taxpayers, some of whom could argue that it is unfair for all taxpayers paying for some individuals' private pensions, particularly when some people do not have access to such provision themselves.
I appreciate that each of you is likely to find this response disappointing. But I hope it also clarifies that the cost issue is not always as simple as it may first appear and no Government would sign a blank cheque to an unknown liability. I must therefore continue to stress the message that I know Andrew Smith gave to you during your meeting with him in September - that whilst we are considering all proposals put forward, we do not wish to provide people with false hope that the Government will step in to help members of defined-benefit pension schemes which have already started to wind-up.
Finally, you have requested a meeting with the Prime Minister to discuss your situation further. Unfortunately, diary commitments mean that the Prime Minister is unable to hold such a meeting.
Malcolm Wicks MP
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Dr. Ros Altmann
20th November 2003
DWP PENSIONS MATERIAL STILL NOT WARNING OF RISKS. ANOTHER CASE OF PENSION MIS-SELLING, BUT THIS TIME BY THE GOVERNMENT!
Andrew Parr of the Pensions Action Group has been looking at the official pension booklets issued by Government-related agencies and finds that these are still encouraging employees to join their company scheme and failing to alert them to the fact that they could lose their entire pension entitlements, if their employer fails. Although the Government’s June 2003 announcement that there will at last be insurance protection for employer schemes is warmly welcomed, this scheme has not started yet. It is still the case that there is no protection for non-retired members, and no-one is required by law to warn them of this. If Government wants people to put money into pensions and also wants to retain employer defined benefit pension schemes, it must do something to rectify this now.
Every week, more companies are becoming insolvent, with pension funds that will not pay out the promised pensions. More unsuspecting workers are suddenly finding that the retirement income for which they have saved diligently for decades and on which they were relying for their future – has disappeared. In the last few days it was the members of Pervian White Dove in Southend, who will be next?
In fact, some pension funds do not even have enough money to pay out the so-called ‘Guaranteed Minimum Pension’ which is supposed to replace State benefits. This means that people in employer schemes may not even get the minimum level that the State promised them. This is an outrage. How can this be acceptable? European law requires Government protection of pension rights on insolvency, but the UK has broken this law. Successive UK Governments have failed to act. I recommend that we should consider introducing the insurance scheme straight away, from 2004, with employers being asked to contribute an initial amount which can then be adjusted later, when final figures are decided (or perhaps the Government can set aside a contingency sum to fund some of the premium for the first year). Then we could start to restore confidence in our once-great pension system.
The Government is frightened to tell people that occupational schemes are not safe, because it is worried that warning of the reality of the situation will destroy confidence in pensions. I think these concerns are valid, but the answer is not to just carry on pretending all is fine, hoping that not too many people will find out. The answer is to ensure that the system is safe, which means introducing insurance protection as soon as possible, plus agreeing to compensate all those who have lost their pensions since flawed legislative changes were introduced in April 1997. All other financial products must carry a risk warning, yet somehow the pensions industry and Government departments are still conspiring to prevent people from knowing the risks they are taking in their employer’s scheme.
Having made it safer for the future, we must compensate those who have suffered in the past, just as you would expect a financial firm to do if they mis-sold products to people. Government could introduce compensation at minimal cost now, but it needs to act quickly. My proposals entail calling a halt to the winding-up process now, stopping schemes from buying annuities and keeping them running, so that they can use their assets to pay out all pensions as they become due over the next few years. Then, if the money runs out, the government can add funds in future to keep paying the pensions and this can be budgeted for over time. It will not cost that much (under £100million a year). They will have to do this sooner or later, but if they wait, it will cost the taxpayer so much more. Why are they waiting until they lose in Court? This will cost the taxpayer so much more, because once the wind-up is finished there is no money left to finance the compensation.
The attached email highlights how Government material is failing to warn of the risks. Let’s stop having to mis-sell pensions and make them safe instead.
About Dr. Ros Altmann:
Ros Altmann is a Governor of the London School of Economics and an independent policy adviser on Pensions, Savings and Retirement issues.
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Andrew Parr's e-mail:
You are probably aware that you can work for over forty years, contributing all the time to a pension scheme, and still have no pension when you retire. Something like 50,000 people are affected from well known companies like ASW, Dexion, UEF, Kalamazoo, Blyth & Blyth and many more.
This inequitable state of affairs can occur if your final employer goes into receivership. You can lose every penny; both your contributions and money you have transferred in from previous employers.
Unlike every other financial product there are no risk warnings with occupational pensions. Until just a month ago the National Association of Pension Funds (NAPF) was still selling booklets which said that occupational pensions provided the promise of a guaranteed pension. These booklets were withdrawn just a month ago after I used them in a presentation at a Labour conference fringe meeting in Bournemouth in October.
The NAPF are not alone in giving bad advice. I've just obtained some booklets from the Pension Service (which is part of the Department of Work & Pensions, DWP). Of particular interest is one called "Occupational Pensions Your Guide" ref PM3. Its date is May 2002 (although the books were sent out in November 2003)
I have read the book from cover to cover and there is not a single mention of risk any where in it
There is a section with the heading:
How do I know my money is safe?
It says there is trust law, trust deeds and specific laws protecting your pension, states the fund belongs to the members not the company, states there are laws about the way schemes are run and it is all regulated by OPRA who (and this is a direct quote) "protect your interests". No mention of risk.
There is a section with the heading
What do I need to think about?
It says you should think about how long to retirement, read the guides from your employer (personal comment: these will say promise and guarantee) and think about your career. Nowhere in this section does it say "consider the long term viability of the company because you could lose the lot". I have worked in the steel industry since 1969 and, (because I have always known it is an industry in decline and under threat), I would have got out years ago if I knew my pension could vanish with my employer.
In a section headed
What types of schemes are there?
it says that (direct quote) "for a scheme to be able to contract out of the additional state pension it must pass a test of overall scheme quality. They must offer benefits that are the same as, or better than, the State Second Pension. The scheme actuary [..] must issue a certificate to show that the scheme is meeting this standard". Overall scheme quality? Must offer benefits at least as good as second pension? Certificates? Where is the risk warning in this?
In another booklet "A guide to your pension options" PM1C dated April 2003 (yes 2003) it compares personal and occupational pensions, warns about the risks, charges and unpredictability of stakeholder and personal pensions, but under a heading
Should I join my employer's occupational pension scheme?
it says (direct quote) "Most members [...] will be better off when they retire than they would be if they had not joined it. [...] Generally this means you will get a bigger and better pension than you could get for the same money anywhere else. Occupational pensions are usually a very good deal so if your employer runs a [..] scheme check it out carefully [..] If you are in any doubt (my emphasis) get as much information as you can, for example by reading information from the scheme provider or by talking to a union representative or financial adviser before you decide". This advice again takes you to material with the words "promise" and "guarantee". Financial advisers would, of course, be liable for compensation claims if they advised you not to join an occupational pension scheme. Nowhere in this section on occupational pension schemes is there a word on risk.
There is a section called:
What else do I need to think about?
No mention of risk here either. No suggestion that you should consider if your employer will be around when you retire.
I am amazed that I can get this information and advice from the DWP in November 2003 when the problem of pension wind-ups has been around for at least four years.
Following the Pensions Summit organized by Derek Wyatt MP on November 4th I have written to Pensions Minister Rt Hon Malcolm Wicks MP and Chris Pond MP (who spoke in the house) challenging them to produce any material available to the general public from the DWP which warns of the risk that people were taking with their occupational pensions. As yet I have had no reply.
Press Release by Dr Ros Altmann, 3rd November 2003
A BOLD MOVE BY ISTC AND AMICUS
I welcome, though with sadness, the move by the ISTC and Amicus trade unions to pursue legal action against the Government, for failing to properly protect pension contributions of members of ASW pension scheme and other UK final salary private sector schemes.
I applaud the unions for having the courage to fight for the pension rights of their members and this clearly demonstrates the value of having a caring union to help workers caught in such a grossly unfair situation.
The problem of wind-ups on insolvency is a terrible indictment of our pension system. Having been involved in pension research and policy for over 20 years, I care about pensions and am deeply concerned at the damaging effect on confidence which this problem is having. I believe that the Government must compensate these victims as soon as possible, in order to try and restore confidence in our private pension system.
Having met so many of the thousands of people whose lives have been devastated by the loss of their 'promised', 'secure' pensions, I find it hard to believe that the Government is taking so long to agree that the mistakes of our pension system must be made good. In 2000, the Government issued a consultation in which it acknowledged that members believed their pensions to be safe, when in fact they were not. At the time, as a consultant to the Treasury, I recommended to the Myners Review that the wholly inadequate Minimum Funding Requirement (MFR) should be replaced by an insurance arrangement, which would guarantee to pay pensions to people whose employer failed, if there were insufficient assets to pay promised pensions. The insurance idea was rejected. Only now that so many schemes have failed, has the Government finally proposed insurance protection, but it will not come into effect until 2005. This leaves many thousands of people still without the pensions which are rightfully theirs.
I am offering my full support to the cause of achieving compensation for the victims of this situation. I offer my time and my expertise to help resolve this matter and would hope that it will not have to get as far as a Courtroom. The taxpayer would then be liable for legal costs and may also be forced to purchase annuities for all those affected. This could cost billions of pounds and would be dreadfully damaging to public finances. I have proposed a scheme which could help to resolve this at minimal cost to the Government. If the Government accepts proposals to run the schemes on, rather than buying annuities, the cost of compensation can be spread over many years and is likely to average less than £100 million a year. I believe the Government will be much better advised to settle this matter now, rather than lose in Court.
Dr. Ros Altmann is a Governor of the London School of Economics and an independent policy adviser on Pensions, Savings and Retirement issues
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Press Release from ISTC 3rd November 2003
ASW Unions Launch Pension Legal Action against Government and back Labour MP’s amendments to Pensions Bill
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Two trade unions will launch an historic legal action today to reinstate the pensions of thousands of workers who have lost their benefits when their companies went bust.
ISTC the Community Union and manufacturing union Amicus will issue a High Court claim today (Monday 3 November) on behalf of 1,000 pension scheme members of Allied Steel and Wire Ltd (ASW) from Cardiff and Sheerness who lost the bulk of their pensions when the company was declared bankrupt in 2002, leaving two pension funds in deficit.
ISTC and Amicus say that the Government’s failure to properly apply European law, to protect workers pensions when their employers are declared insolvent, means they are liable for the shortfall.
If successful the case, which is being taken to the Court of European Justice, will set a precedent for thousands of other workers who have lost pension benefits when their employers have gone out of business. This will include, the former workers at United Engineering Forgings Ltd based in Ayr, Chesterfield and two other locations which went bust in 2001, leaving its pension fund in deficit.
Commenting, ISTC General Secretary, Michael Leahy, said: "The mistakes and failures go back over twenty years. The Thatcher Government’s made mistakes in the early 1980s. The Major Government failed to correct them when it had the chance in 1995. Labour has started to correct these mistakes, but is not proposing to compensate our members at ASW, who are facing hardship in retirement through no fault of their own.
We hope that the Government will think again and recognise their responsibility to our members at ASW, but if they don’t, then we will fight this case all the way.
The message from today for working people in Britain worried about their pension is clear: it is only by being a member of a union that you can protect your pension."
Amicus Assistant General Secretary, Paul Talbot, said: "ASW workers were told that their final salary scheme was secure but now they’ve lost almost everything. In fact, they’d have been better off putting their money under their beds.
Because the UK government has failed to protect workers pensions, as other EU member states have, they have a moral and financial responsibility to compensate these people now."
ISTC and Amicus will also be supporting Kevin Brennan, Labour MP for Cardiff West, who has pledged to table amendments to the Pensions Bill, expected to be announced in the Queen’s Speech on 26th November, to provide for compensation for his constituents who were members of the ASW pension scheme. The unions will be providing a Bill Team for Mr Brennan to draft appropriate amendments and will be writing to all Labour MPs urging them to support the amendments.
At 2.30 pm on Monday 3rd November, former employees of ASW, together with Michael Leahy, General Secretary of ISTC and Paul Talbot, Assistant General Secretary of Amicus, will serve a letter of intent on Pensions Minister Malcolm Wicks, at Richmond House. You are invited to join us outside from 2.30 pm to 3.30 pm for photo and interview opportunities.
Notes for Editors:
1. ISTC and Amicus believe the Government proposals for a Pensions Protection Fund, announced earlier this month, are a clear signal that current pension provisions for workers whose employers go into receivership are inadequate.
2. The case is likely to be heard in the High Court early in 2004, at which point Council for the unions will request that it be transferred to the European Court for a hearing at the earliest possible date.
Points for Meeting with Rt Hon Andrew Smith MP 9th September 2003
Number of Affected People
Surprisingly there seems to be no official figure. Some government sources say 1.5 million but that is 1 in 20 of the workforce which jars with reality. We think that particular figure is schemes which have been closed to new members or had their terms altered.
The pensions theft web site has been in existence for over a year and has had good exposure. The number of people known to the site is about 6,000. Given that the site is easy to find with Google and Yahoo and has been publicised in the national press, TV and radio programmes and has several links on the BBC website we now think that we have heard from over 50% of schemes and the true figure is around 10,000. This also aligns with observations in the real world and comments from experts in the pension press. The compensation proposals are based on 20,000 people.
It is worth noting that the web site has not heard of any problems with schemes wound up before 1997. The vast majority of schemes where members have lost their pensions are actually post 2000.
The car insurance analogy
This is a smokescreen. A better analogy is health and safety where you can’t simply say “Sorry there was an accident and you’ve been injured, but we’ve now put guarding in place so that’s the end of it”. We are suffering because the last Tory government introduced bad legislation which this government has now recognized.
The government has acknowledged there is a very real problem
As a result it has introduced the insurance scheme and will revise the statutory order in this session of parliament. This crisis has been caused by bad legislation and government negligence.
You have to draw a line somewhere
The 1995 Pensions Act became effective in 1997.At this time annuity rates were over 10% and the stock market was strong. We know of no people affected before this date. The vast majority of known wind-ups are actually post 2000.
The cost of compensation is enormous
No it isn’t, and it will be spread over many, (possibly more than fifty), years. Calculations handed to Andrew Smith show that the annual cost is of the order of £60 million. Even if you assume 40,000 people, the total cost over this period is much less than Gordon Brown’s stealth tax removes from pension funds in one year.
It is a breach of human rights that money has been taken from our salaries and has been used to pay pensions for other people. Even money transferred in from other schemes has been lost. Why should a 55 year old pensioner have more rights than a 64 year old employee? Everyone should be treated equally.
Nobody warned us of the risk
Every other financial product carries a risk warning. We were lead to believe by the government (publications from FSA, DWP, NAPF, the DWP web-site, tax relief etc.) and our employers (who were allowed to use words like promise and guarantee) that contributing to an occupational scheme was safe.
You had no option but to join a company scheme, it was a condition of employment
And consequently most people thought their contributions were safe.
Until recently the Inland Revenue prevented you belonging to another scheme
Thereby forcing you to put all your eggs in one basket
The 1995 Pensions Act was flawed legislation and mis-sold
Everyone in government has said its aim was to protect pensions (many MPs still believe this). In reality it only protects pensioners, it made things worse for employees yet to retire. It was badly thought out legislation.
Why not follow Frank Field’s suggestion on Unclaimed Assets?
The Irish Government collects Unclaimed Assets, so there are surely no insurmountable problems. Many other EEC governments do the same.
Mirror (Maxwell) Pensions
Retrospective payment was made to the Mirror Group pensioners. Why should your pension be safe if your employer is a crook, but not if your employer is honest but goes into receivership?
Government money was injected when Railtrack went into receivership. Part of this money was used to maintain the Railtrack pension fund through the re-organisation. Why did the government support this company but not others?
Council Tax & Public Service Pensions
A significant part of the large increase in my council tax is being used to plug a hole in the KCC pension fund. Why am I expected to plug public service pension shortfalls when I have lost my own pension? Similar arguments with civil service and (particularly) MPs’ pensions
People simply have no faith in pensions (or any other financial product) having suffered from endowments, Equitable Life, with profits schemes, stock market crash, exorbitant management fees, scams etc. etc. There will be a major problem if nobody saves and everyone ends up on benefits. Compensation for us will send a positive message.
The biggest villain is the fall in annuity rates
This hits employees twice, it increases the amount that must be taken out of the fund and reduces the value of what is left. The government did nothing to mitigate the effects that falling annuity rates had on the 1995 Pensions Act.
Early Retirement Issues
Companies were allowed to use early retirement instead of redundancy payments. The attractions of this are obvious: the employees, not the company, paid for redundancies.
In 2000 ASW said it was going to shed people and asked for voluntary early retirement from people over 55 with no docking of pension for early leave, (i.e. you did not get the usual 5% knocked off for each year you leave early). Fred, who is 56, and Joe, who is 62 both apply. Fred is a bit of a pillock who does not work hard but is not bad enough to fire. His application is gladly accepted. Joe is very good at his job, and well respected. His application is refused because he is an asset to the company.
Three years down the line ASW goes bust. Fred’s pension is secure and guaranteed, Joe, on the verge of retirement, now finds he has no pension at all.
Human rights again, why should one group of individuals be treated so differently?
It is odd how directors often manage to get early retirement in the year before a company goes bust. At ASW two directors (Gerald Sheehan and Bill Bagnall) left at early ages (with allegedly no early leaver deductions) less than a year before the crash, removing huge sums from the ASW fund. An £80k pension costs the fund £80k/0.05 = £1.6 million. Their retirements were investigated by OPAS/OPRA and found to be legal, but moral? We have heard of similar tales from other companies.
The Labour Party, despite its tradition of looking after the welfare of workers, will be remembered as the party that killed off traditional occupational pension schemes
5th September 2003
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ISTC calls on Government to compensate ASW employees or face legal action
ISTC - The Community Union has written to Andrew Smith MP, Secretary of State for Work & Pensions, asking him to “see sense” and accept “the moral and legal case” for redress for employees of the former ASW steel company which went into receivership in July of last year with its pension funds insufficiently funded.
Michael Leahy, General Secretary of ISTC – The Community Union, announced that he has written to Mr Smith informing him that the ISTC welcomed the proposed changes to pension law announced recently by Mr Smith. However he said that it was unacceptable that ISTC members at ASW in Cardiff and Sheerness would not be compensated for the previous Conservative Government’s failure to introduce adequate protection for employees’ pensions if their employer went into insolvency, as required under the 1980 European Insolvency Directive.
Mr Leahy said:
“The ISTC has been in continuous dialogue with the Department of Work & Pensions (DWP) since it became apparent in July last year that our members at ASW faced the prospect of receiving only a fraction of the expected pensions that they had saved for, in some cases for as many as 30 years. Most of them lost their jobs as well.
"We lobbied hard for the introduction of an insurance scheme to protect members from losing their pensions should their employer become insolvent – following the experience of our members from ASW – and welcome the establishment of the Pension Protection Fund. But it cannot be right that the law will be changed primarily because of its deficiencies being exposed by the ASW case and yet ISTC members who saved long and hard, as they were advised to do by pension advisors and successive Governments, should be left high and dry with the prospect of hardship in their retirement.
"In December we announced that we had appointed solicitors to advise us whether we could demonstrate that the Conservative Government had failed to adequately implement the 1980 European Insolvency Directive, which required them to introduce by 1983 measures to protect employees from losing their pensions if their employer became insolvent.
“In January we announced that we had appointed David Anderson QC, a specialist in European Union law and Paul Newman, a barrister specialising in pension law, to conduct our case. They agreed to represent us should the research that was being undertaken show that we could bring a case successfully.
“Subsequently it became apparent that ASW needed to be formally wound up in order to trigger the Directive and, on 24th April, our petition to wind up the Company was successful. Our lawyers are now in correspondence with the European Commission seeking disclosure of all relevant documents about the Insolvency Directive.
“Our legal advice is that we have a strong claim against the Government for the failure to implement the Insolvency Directive and to force it to make up the deficits in the pension schemes. In my letter to Mr Smith I have welcomed his acceptance of our argument about the need for an insurance scheme to protect people who have paid into company pension schemes. This is in stark contrast to previous Conservative inaction. I have asked him to see sense and recognise that not only is there a strong moral case for making the changes retrospective to ensure that the Pension Protection Fund covers those who paid into the two ASW pension schemes, but we believe that there is also a compelling legal case.
“The ISTC’s position is clear. We hope that we can reach agreement with the Government so that ISTC members at ASW have their pension entitlements restored and do not have to face hardship in their retirement. If we cannot then we are fully prepared – with the support of Amicus, some of whose members are in a similar situation – to take legal action against the Government on our members behalf.”
ISTC - The Community Union represents members in current and former steel and metal communities. The ISTC is the largest union in the steel and metal industries overall, and represented over 90% of ASW's employees.
The ASW plant in Cardiff formerly employed over 900 people and the ASW plant in Sheerness employed over 300 people prior to being placed in Receivership on 10th July 2002.
On 18th July 2003 The Independent Trustee, Pinsents’, appointed by the Receiver – KPMG – announced that it was winding up the Sheerness and Cardiff pensions schemes. There were 1,100 Members (750 deferred) of the Sheerness fund, and approximately 4,500 Members (2,400 deferred).
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Response to Green Paper
The Department of Work & Pensions has published its report on the responses to the Green Paper. A summary is available free of charge from Welfare Reform, Freepost (HA4441), Hayes UB3 1BR.
The full report, can be downloaded from here.
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Some thoughts from pensions expert Dr Ros Altman posted on the pensionstheft e-mail group on Saturday 14th June:
I have just returned from the US and am following the interesting emails on the pensionstheft group circuit.
I just want to point out that there are many, many reasons why our pension schemes are in trouble . It is not just one or two factors that has caused this. Responsibility lies with lots of groups.
The Tory Government made a big mistake when it decided to tax pension fund surpluses in the late 1980's. These surpluses should have been allowed to build up, in order to cover schemes for times when markets turned down and/or when more and more people retired and needed to receive pensions from the scheme. Essentially, we have failed to let the surpluses build up and they are just not there when we need them.
After this, successive Tory Governments piled on more and more costs, thinking pension schemes would always be able to afford to pay more out, because they still had big surpluses. Of course, the reason pension funds had the surpluses was because not many people were actually drawing pensions yet (there were far more people contributing than numbers retired) and also because equity returns had been unusually high and scheme assets had grown faster than expected. But the pool of assets was too tempting for Government to resist and they kept wanting to pile more costs onto the schemes, in the process making pensions more and more expensive to provide.
Then the Tories made the mistakes surrounding the 1995 Pensions Act. They forced all employers to guarantee to pay fully index-linked pensions to all members (up to 5%). On top of all the other mandatory requirements (like spouse cover, preservation and revaluation for deferred members etc) this added enormously to the costs of providing pensions. These measures are all, in themselves, excellent for members, but by making them compulsory, there was no 'safety valve' in the system. If investment returns fall, or if the employer's business is in trouble for a couple of years, they could not escape these extra costs.
The 1995 Act also introduced the MFR and regulations requiring more costs to prepare Statements of Investment Principles, pay for compliance and regulatory expenses etc. This again added to the costs of running the schemes - and of course had the terrible effect of leading people to believe that their scheme assets were safe if it was 'fully funded' on the MFR for example. It also introduced the iniquitous priority order rules, which mean people not yet retired can end up losing all their pension!
Finally, of course, this Government removed ACT relief altogether - but this had already been reduced by the Tories, so it is not entirely fair to blame all on Gordon Brown.
So, overall, successive Governments have conspired to make our pensions more and more expensive.
Then we come to the role of employers. They too could not resist getting their hands on the tempting pool of assets sitting in the pension funds. They used these to hide the costs of industrial restructuring in the 1980's and 1990's, but giving people generous early retirement benefits (paid for by the pension scheme). This also led others to expect to be able to retire early, which, of course, means that the pension must be paid for longer and longer, as life expectancy has continued to rise.
Employers also took contribution holidays. This is a real problem, because they should have kept paying in to build up assets to cover for times like now, when markets and investments go wrong, but more and more pensions still need to be paid. They relied on actuarial assumptions that showed equity returns would deliver strong growth consistently over time and, therefore, make the pension promises affordable.
Which brings us to the role of the actuaries and trustees. Actuaries' forecasts allowed schemes to take contribution holidays and trustees trusted their actuarial advisers to give them reliable forecasts of what contribution rates should be recommended to employers. If the actuaries said the employer could take a contribution holiday and still afford to pay the promised pensions, the trustees didn't question this. They did not think to say to the actuaries, how can it be that we have more and more people retiring, the costs of providing pensions are rising, equity returns have been very strong and yet we think this can just be relied on to carry on into the foreseeable future. Equities should not have been relied on to keep providing strong returns. As markets rose and schemes became more mature, the equity component should have been reduced, but instead it was actually increased!
In addition, people are living much longer and expecting to retire earlier and earlier. Pensions were never meant to last for 30 or 40 years. Yet the pensions industry fooled itself into thinking that it could provide really good pensions with not very high contributions.
Finally, of course, interest rates have fallen to very low levels and this has meant the costs of providing pensions - especially via annuities - has rocketed.
All these factors have come together to leave us in the mess we are in today. You cannot just blame the Government,or the employers, or the actuaries, or the trustees, or the investment managers. The whole industry must share the blame and it is time to get real. The system is not working and must be sorted out, to help provide decent pensions for people in future.
We have been deluding ourselves perhaps, to truly think that companies can afford these kinds of open-ended liabilities for ever. Especially with all the extra costs we have piled on over the years, without keeping aside enough money to pay for them.
I think this week has been an excellent first step along the road to getting a better and safer pension system in place. If we are moving away from defined benefit and final salary schemes - which seems inevitable - then we must make sure we spend time to structure alternative money purchase arrangements properly, help people to think about gradually retiring, rather than suddenly stopping work in their 50's and protecting people whose employers have promised to pay them a particular level of pension.
Those who lost their pensions with no warning, while thinking they were properly protected by the law, should be compensated and we should make sure this does not happen to anyone else in future. We are closer to this today than we were last week and that, for me, is good news!
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DWP Note of Green Paper Member Protection consultation event held 13th February 2003
PROTECTION IN THE CASE OF WIND UP
Fairer sharing of assets – rebalancing the priorities between pensioners and non-pensioners
A lot of support for changes to the priority order that would share the pain between all members, giving them equal rights.
Support for changes to be brought in as soon as possible.
Support for stopping the indexing of pensions in payment if other members have not received their pensions. Prediction that ASW members may have received 90-95% of their pensions if the fund had been shared fairly amongst members, with no indexation to pensions.
Creating different categories of members on wind up would add to complexity and cost.
There is the problem of age discrimination if you create different categories based on age.
The present system of having pensions in payment at the top of the priority order may encourage people to retire early, but no support for changing the position of pensioners.
Amending the priority order of creditors
Some support for a change to be made about where the pension scheme lies in the list of creditors, but acknowledgement that this might be of little help if there are only a few assets.
Concern that a change to the creditor list could make it more difficult for companies with final salary schemes to borrow money, but some acknowledgement that FRS17 does this anyway.
Insolvent Employers - Insurance or a centralised "clearing house" arrangement
There was support for a form of insurance.
There was some support for the clearing house option.
Some felt that insurance would provide members with confidence about what they would receive as a pension, and that it would guarantee some security.
There were suggestions about how to pay for this insurance - part of the tax relief that pension contributions attract could be used to provide an insurance scheme; - funds could pay a levy for the cover, and some schemes could be allowed to opt out of paying the levy, if they could satisfy the regulator that they had their own insurance cover; - contributions to a central discontinuance fund could be from employers, employees or a combination of both.
Some thought scheme members would be willing to trade growth in their fund for additional security, for example, the representative for UEF said that the UEF workers would have been happy to pay extra to cover the pension debt.
General view that members of money purchase schemes would be unlikely to want to pay for final salary schemes. And the state should not have to fund such a scheme, as many taxpayers do not have the advantage of a company pension scheme.
The insurance industry was wary about providing some form of insurance because of: - problems with the practicality of providing private insurance for a public liability; - underwriting the risk likely to be a problem, may not be feasible and may be costly, particularly if there is no underwriting of the risk by Government; - moral risk, with employers deliberately underfunding their schemes; - and additional costs are imposed on schemes employers may not provide final salary schemes to the extent that they do presently.
Improved Compensation Arrangements
Some views that compensation should be paid to members who have lost their full pension entitlements, irrespective of whether the loss was as a consequence of fraud or theft.
View that action is needed on solvent employers that decide to wind up their schemes.
View that employers should not be able to walk away from providing the pension benefits they promised, but also views that schemes have been set up voluntarily and on the basis that employers could walk away from them at any time.
Some felt solvent employers who wind up their pension schemes should have to guarantee the pension benefits to the members and provide a reasonable alternative pension option.
Retrospection is difficult, but can be right.
When companies set up schemes they understood that they could walk away from those schemes at any time. If regulations set a date in the future when changes were to be implemented it would mean that employers would wind up schemes in that time gap.
Any change to the priority order should not be retrospective in its application.
New regulations could be effective from now, and apply to all schemes currently in wind up.
OTHER AREAS COVERED
The role of the Regulator
Strong views that the limits that are currently placed on Opra are frustrating, and that there should be more protection and a more proactive regulator, perhaps modelled on the FSA. Also that there should be a mixture of good regulation backed up by a good regulator.
Consultation with employees
Views that as a minimum, employers should consult their employees when making changes to their pension schemes, but that the requirement should be for employers to negotiate with their employees about pension changes, rather than just consult them. They should have to inform employees when they want to take a contribution holiday.
Views that the costs charged by the independent trustee could be met by the company or receiver rather than the pension scheme, and costs that are charged in wind up should have to satisfy a reasonableness test.
To reduce the costs of winding up schemes, which can be high, you could introduce a fast track version of wind up.
A number of individuals said they had anecdotal evidence that professional sometimes charge excessive fees during the winding up process. Some consensus that the regulator might play a more pro-active role, including ensuring independent trustees fulfil their duty to look after the interests of scheme members.
Funding of Schemes
Agreement that a fundamental issue is whether there are adequate funds in the pension scheme. Mixed views on whether the proposed scheme specific funding requirement would be better or worse than the minimum funding requirement (MFR).
Information provided to Members
Strong views that presently, workers are promised a level of pension benefit, but do not know about the level of risk possible.
Some thought better information should be provided for members about what happens should the scheme wind up, but others argue against this, as there are only low numbers of schemes that wind up and that this information would frighten people.
Financial advice should not be about providing financial products, it should be more about providing advice to people when they need to make financial decisions.
Employers should not be allowed to take money out of schemes, as they used to. Changes should be made to the rules on surplus. The volatility of the equity markets means that surplus limits should not be as restrictive as they are presently.
Confidence is key for scheme members. OPAS have been receiving phone calls from people questioning the security of final salary schemes.
Programme of work
The industry and employers need a lead in time to make sure they get things right. There are a lot of changes to pensions proposed in the Green Paper.
Employers need to have time to implement changes and need certainty about the timing.
The changes to winding up are needed quicker than other proposed changes.
Company trustees in practice have more power than member-nominated trustees.
The TUPE rules should be strengthened.
The Green Paper proposals spread the pain rather than remedying the cause.
It is unclear how you improve the pension security for members without placing an extra burden on employers.
Companies that have final salary schemes can have problems borrowing money, as some lenders are not happy to lend to them.
More regulation will push companies into providing money purchase schemes.
Consideration should be given to directors/trustees use of exoneration clauses and indemnity insurance.
Need to have simplicity. This encourages members to join the pension scheme. If you tell members that the pension scheme is a secured creditor, this is clear and members can understand it.
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NOTES BY Keith Plowman, ASW SHEERNESS PENSIONS ACTION GROUP
John Hayter and myself attended a consultation meeting on Member Protection chaired by Ian McCartney on Thursday, 13th February. The seminar was arranged to discuss the recent government Green Paper 'Simplicity, security and choice: Working and saving for retirement'. The seminar was attended by about 50 people from Government, DWP, FSA, OPRA, Insurance companies together with representatives from interests having already suffering through wind up. (ISTC, ASW Sheerness and Cardiff, Ravenhead Glass and UEF)
The Government has made 'a clear commitment to improve member protection, so as to ensure they can have confidence that the pension they are promised will be delivered.
The three key proposals set out in the paper are:
1. A new pensions regulator whose objectives are focused on protecting the benefits of scheme members:
2. steps to give members greater confidence that when schemes are wound up, they will get the benefits they were promised; and
3. ensured that members are consulted about changes to their pension scheme.
We were asked to give our views on:
* proposal for a new kind of regulator
* the wind-up priority order
* the place of pension schemes in the priority order of creditors
* clearing house or insurance in the case of wind-up
* protecting members whose solvent employer winds up
* consulting members before making pension changes
We circulated a written response on the points raised and brought compensation back to the top of the agenda.
Our replies are as follows:
Thank you for inviting ASW representatives to this consultation meeting.
We appreciate that all participants will not have sufficient time during the debate to reply on each of the points raised, so we have presented this written response on behalf of our group.
The main objective of the ASW Sheerness and Cardiff Action Groups is that the promised level of pension payable to deferred members of the two ASW final salary schemes at the date of winding up in receivership on 18th July 2002 is restored in FULL. The Green Paper does not offer any proposals for compensation resulting from wind up, nor does it offer any constructive remedy for meeting the full promised benefits of any occupational pension scheme in future, other than to spread the loss over a wider group, to suggest working for longer, and to propose higher levels of contributions. The result of these suggestions will be a total loss of confidence in occupational pensions by the populace as a whole, unless a remedy is found for compensation of promised benefits for all people already suffering this totally immoral situation.
After the Maxwell debacle, we were assured that our promised pensions had been safeguarded when, patently, they are not! We are pleased to read the commitment of the Government 'to improve member protection, so as to ensure they can have confidence that the pension they are promised will be delivered. How does the Government intend to compensate occupational pension scheme members, such as ASW scheme members, already affected by the shortfall in existing laws on protection?
Taking your other points in turn:
* More pro-active regulator (p62 and 63)
We agree that the regulation of occupational pension schemes should be more pro-active. The cost of this regulation should not be direct to individual schemes. Any costs of wind-up should be charged to the company, or to the receiver, not to the scheme itself. Employees should not be further penalised when their employment income is already at risk.
* Pension Scheme position in priority order (page 63 and 64)
The priority order should be amended so that all members have equal rights
in wind up. However, this is not a good remedy, since pensioners in payment would then suffer hardship. Members should not be exposed to a position where their promised benefits are jeopardised in the first place.
* Pension Scheme position in creditors priority order (page 64)
The occupational pension scheme (and employment costs) should be a first priority secured debt in wind -up. If these costs had to be covered first, the financial institutions would think harder and longer before withdrawing their continuing support . The financiers know and cover the risks, the employees should not be asked to bear the biggest losses.
*Clearing house or insurance proposal (page 65 and 66)
We are strongly in favour of insurance. The cost should be met from contributions at a flat rate and underwritten by the government. Members pay their taxes and NI contributions without question to support state and state worker schemes, so it is in the state interest to acknowledge this support.
*Protection in wind-up by solvent employers (page 66 and 67)
Solvent employers should bear any costs of wind-up, they should cover and insure accrued benefits at that time, and should provide acceptable alternative arrangements for displaced members.
*Consultation before changes (page 69)
Before any changes to schemes, then employee representatives should be consulted. If agreement cannot be reached, the case for change should be decided by the independent regulator.
Our strong belief is that TUPE needs strengthening. The rules appear to be there to be 'got around' rather than to offer any protection in a company wind up situation. For instance, it is easier to ditch any occupational pension scheme if the company goes into receivership (even if the scheme is in a healthy state financially), simply because this makes the company easier to sell.
Similarly, the full contracted redundancy payments and ongoing salary costs can be downgraded by laying off the workforce for a 'suitable' period before re-employment.
Chairman of Sheerness Pension Action Group
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COMMENTS ON THE DAY
The underlying thread of the debate was that pension schemes are regarded as unsafe and that this needs to be corrected quickly. Everyone agreed that confidence was the key.
Insurance or a Central fund were generally supported, and there was general agreement that there should be some retrospection if the confidence was to be restored. The lawyers and insurers felt that wind-up should be completed much more quickly.
Consensus was that we did not need another pensions regulator -just clearer and stronger laws. There was some admission that OPRA would remain as the regulator and that their remit would be strengthened through law.
There was agreement that workers needed to be treated more fairly and receive a higher level of compensation depending on service than is the case with the current priority order
There was some degree of panic at John Hayter's suggestion that the government, NAPF and OPRA, should state clearly on their websites that occupational pension schemes are unsafe, although everyone acknowledged that people had not been informed clearly of the risks.
Overall, we took a lion's share of the debate through ASW Sheerness and Cardiff.
There were several encouraging features of the day to report.
1. The subject of retrospective compensation or inclusion in law changes
was raised by the Minister himself, and greeted positively.
2. A planted question on compensation and formation of a central discontinuance fund, in particular with respect to the ASW Sheerness and Cardiff schemes, was raised in the PM's question time on the previous day by Kevin Brennan MP for Cardiff West. Tony Blair responded positively concerning compensation for ASW members, claiming that the Government would do their best to help resolve our case. An early-day motion has been lodged on this matter.
3. A meeting with Dr Ros Altmann following the debate was positive in that she felt that the ISTC/Amicus challenge on Article 8 would succeed. She also suggested other areas that we might pursue, such as negligence by theFSA, and the Action Group will work on these.
4. We met with Derek Wyatt and Frank Field on the pension campaign, and their feedback was positive. They are trying to get backing for an all party debate on pensions.
5. We heard from Ian McCartney that a deal has been done with public sector unions concerning transfer of assets from one scheme to another, and they appear anxious to broker a similar deal in the private sector.
We have pencilled in the Labour Party conference in October as a definite focus.
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Council Directive 8019871EEC on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer (Insolvency Directive)
The above Directive was adopted in 1980. It was a partial harmonisation measure where each Member State was required to set up a "guarantee institution" (the National Insurance Fund in the UK) to meet certain debts owed to former employees of insolvent employers. The UK had already had such provisions in place under the provisions of the Employment Protection (Consolidation) Act 1978, and no substantive amendment was judged necessary in order to implement the Directive. The provisions are now contained in the Employment Rights Act 1996 and the Pensions Scheme Act 1993.
The Government meets its obligations under Article 8 of the Insolvency Directive. For example, the Pension Schemes Act 1993 (which consolidated provisions originally in the Employment Protection (Consolidation) Act 1978) provides that certain unpaid pension scheme contributions can be claimed from the National Insurance Fund, through the Redundancy Payments Service, if an employer becomes insolvent. If a claim is successful funds are paid to the trustees of the scheme being wound up. In addition, the Pensions Act 1995 requires salary-related schemes to meet the Minimum Funding Requirement, and provides for a statutory priority order for the distribution of a scheme's assets if a scheme that is required to meet the MFR winds up.
Under Article 8, Member States shall ensure that the necessary measures are taken to protect the interests of employees and persons having already left the employer's undertaking or business at the date of the onset of the employer's insolvency in respect of rights conferring on the immediate or prospective entitlement to old-age benefits, including survivors' benefits, under supplementary company or inter-company pension schemes outside the national statutory social security scheme.
Under Article 4 Member States have the option to limit the liability of guarantee institutions in order to avoid payments going beyond the social objective of the Directive. Where these options are exercised, Member States are required to inform the Commission of the methods used to set the ceilings.
Under the Employment Rights Act 1996 and the Pensions Scheme Act 1993, the Redundancy Payments Service (RPS), on behalf of the Secretary of State for Trade and Industry, makes insolvency payments from the National Insurance Fund (NIF) to qualifying former employees. It then becomes a creditor in the insolvency proceedings in their stead. The amounts payable from the NIF are subject to statutory upper limits. Any debts to former employees that cannot be met under the statutory provisions remain for consideration in the insolvency proceedings.
Section 124 of the Pension Schemes Act 1993 enables "relevant contributions" to be reimbursed from the National Insurance Fund to a pension scheme where there is a shortfall of contributions by an insolvent employer. Claims for unpaid employees' contributions are limited to the actual amount deducted from wages during the twelve months prior to the date of insolvency. Unpaid employers' contributions for the twelvemonth period prior to the insolvency date are also payable but are subject to monetary limits depending on the type of pension scheme. Only a "person competent to act" under the trust deed or rules of a scheme may apply for payment. These may be the trustees, the scheme administrators, a management committee or anyone permitted to act on their behalf such as an insurance company, professional adviser or where the company was the trustee the RPS will accept claims from the employer's representative. The claim must be made on form RP15 and the insolvency practitioner should agree the claims with the scheme's trustees before submitting it to the<typograhical error of missing text here is on the original document> Any payments due from the National Insurance Fund are paid directly to the pension scheme trustees. Amounts over the limit remain listed in the insolvency and may be payable only if sufficient funds are raised from the sale of the employer's assets.
Section 56 of the Pensions Act 1995 introduced a new minimum funding requirement for Salary-Related Contracted-Out Schemes whereby the value of their assets are to be not less than the value of their liabilities. The section was designed, in part, to rationalise the requirements operating at the time. Prior to the introduction of this requirement funding restraints were to be found in the need for Inland Revenue Approval (that occupational schemes had an element of employer funding), Inland Revenue funding limits which laid down the maximum funds which could be held on a tax-approved basis to prevent the build up of surpluses, contracting-out requirements which required an actuarial certificate to be obtained every third year (at least) confirming that if the scheme were wound up there would be sufficient assets to meet members' GMP's in full and reporting conditions requiring Schemes' annual reports to include a statement of whether members' accrued benefits were covered by assets held.
Section 73 of the 1995 Act specifies an overriding priority for the allocation of scheme assets on winding-up. The order of priority provides that costs and expenses are to be met first, then additional voluntary contribution benefits, then pensions in payment followed by accrued pensions, pension increases and finally, disposal of the remainder in accordance with scheme rules.
4, Member States have the option to limit the liability of guarantee institutions in order to avoid payments going beyond the social objective of the Directive. Where these options are exercised, Member States are required to inform the Commission of the methods used to set the ceilings.
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Notes & Letters from October Meetings
ASW Pension Action Group:
The Failures of Current Pension Law when Company Pension Schemes go into Wind-Up in Receivership and the Case for Government Support for ASW Members
The delegation meeting with the Pensions Minister, advisers to the Prime Minister and the Pensions Ombudsman on 15th October represent the Members of the ASW Sheerness Pension Fund and the separate ASW Cardiff Pension Fund. They believe that the they face the prospect of being deprived of a large percentage of their expected pensions because the failings of successive Governments, including the current one, to protect Members of company pension schemes when the employer behind them goes into receivership.
ASW is an independently owned UK Steel Company formed through a 50/50 partnership of British Steel and GKN in 1981, and subsequently taken over in a management buy-out in 1987, before flotation on the Stock Market in 1988.
ASW were primarily based in Cardiff, until taking over the Sheerness, Kent plant from Co-Steel of Canada in January 1999.
Until receivership, the plants at Sheerness and Cardiff were amongst the most efficient and highest productivity steel plants per employee in Europe, and the World.
The Company entered receivership under KPMG on July 10th of this year, and the final salary pension funds of each plant were put in the hands of Independent Trustees, Pinsent.
After barely a week of Receivership, Pinsent announced the process of wind-up of the funds on July 18th of this year, leaving approximately 1,100 Members (750 deferred) of the Sheerness fund, and approximately 4,500 Members (2,400 deferred) of the Cardiff fund both angry and bewildered that promised retirement benefits, which Members believed to be deferred pay and hence contractual, could be snatched away without consultation or protection.
At the time of the decision to wind up the schemes, the Sheerness fund was at least MFR neutral, in spite of a lack of Company contributions for at least five years by either ASW or the previous owner, Co-Steel. The Cardiff fund was in deficit with Company contributions to the minimum level allowed against MFR over a number of years.
The Receivers are currently in exclusive negotiations with a potential purchaser for the Company.
The Experience of the ASW Pension Schemes Members
ASW Members followed the good advice of successive governments, and the Company, to provide for their retirements through investment in apparently sound final salary pension schemes. Members still in employment and contributing to the scheme at 10th July are rewarded for their diligence with least protection in this pension scheme wind-up situation Now they find themselves in a situation where they believe that they have been legally "mugged", and now have no guarantee of receiving anything more than a fraction of their promised retirement benefits, with no indexing of the value against inflation.
Further, since Members were encouraged to join the two schemes and to contract out of SERPS, benefits under SERPS may also be affected. Thus Members found that the only income that they can rely on receiving in full on their retirement is the State Pension.
The ASW Members believe that they have been let down by their employer who used the pension scheme as an alternative to redundancy payments by offering retirement instead – making this attractive by granting early receipt of full pension entitlement – thus directly impacting on the run down of the pension schemes’ finances. This was despite the fact that the Member-nominated trustees objected to it at the time.
In addition, the ASW Members believe that they have been let down by successive Governments, including the current one, who have failed to ensure that Company pension scheme members have adequate protection, particularly in the case of when a scheme is wound up when the Company behind it has entered Receivership. The ASW Members believe that pension schemes should be covered by TUPE and that they should be underwritten by a ‘Central Discontinuance Fund’ should they be threatened with wind-up. This effectively ends the need for an Independent Trustee to eat up the residual pension scheme balance (up to at least 4% of the total), as ASW Members fear that Pinsent’s are doing in this case.
The Failure of the Minimum Funding Requirement
The ASW Pension schemes were wound-up as a direct result of ASW being placed in Receivership. Following the Maxwell situation, the 1995 Pensions Act provided some protection for schemes, which were still in operation.
The Minimum Funding Requirement, which took effect from April 1997 was designed to ensure that schemes are adequately funded and have sufficient assets to meet liabilities in the event of being wound up (Standard Note:SN/BT/1215).
However, neither the Pensions Act nor MFR have provided protection for schemes wound up in Receivership, particularly for deferred members, and particularly for deferred members who are still working and contributing to their fund before wind-up.
The Act allows pensions holidays from contribution for Employers, leaving promised benefits for members not fully provided. Identified under-funding only has to be remedied over a number of years.
It is clear that MFR is an inadequate measure in the case of Receivership and wind-up, because of the cost of wind-up in itself. A fund at 100% MFR does not mean that Members can expect anything like full benefits.
For instance, the Independent Trustee can "legally" take 4% or more of the fund in costs, with no real accountability or control of his actions or costs. All costs of the Independent Trustee are charged to the fund, whereas ASW Members believe that they should be charged to the Receiver, who appointed them. Neither the Receiver, nor the previous Trustees of the fund has any power of control over the costs or actions of the Independent Trustee. Any inquiry or communication about the Independent Trustee’s costs or actions incurs a further cost against the funds
The ASW Members believe that an Independent Trustee has a conflict of interest with regard to his relationship with the Receiver. The Independent Trustee is incentivised not to make a large claim on behalf of the Members against the Receiver, since the Receiver appoints the Trustee. Otherwise the Independent Trustee may fear that he will not be appointed by the Receiver in future similar cases. In addition, the ASW Members are concerned that the Independent Trustee has no interest in winding up the scheme quickly for fear of curtailing his own generous fees.
This is not a case of wind-up having the effect of freezing benefits, but an active and retrospective removal of accrued entitlements. Thus, under the current law, it is possible to contribute to a final salary scheme for 40 years, and receive no pension in a wind-up situation. This is clearly unfair and an enditement of successive Government’s negligence in this area.
There is an additional loss to Members in buying benefits on the open market rather than through investment returns, following wind-up, meaning that they are further disadvantaged. There is no longer anyone to underwrite the scheme. Transfer values in themselves only offer a fraction of accrued benefits.
As from 19th March this year, a change was made to MFR, requiring schemes in wind-up to have sufficient funds to cover IT fees, annuity costs, etc. However, although this pre-dated the ASW schemes wind-ups, it is meaningless because there is no employer to make up the funds, unless the schemes were to be scheduled as secured creditors.
As a result of all these factors, ASW Sheerness and ASW Cardiff Pension Fund Members are in a much worse position than others.
The Case for Government Support for ASW Members
ASW, (and Co-Steel), have not contributed adequately to the pension funds for a number of years before receivership, partly because of mismanagement, but also partly because of the pressures that they have been under as a result of the economic policies, particularly with regard to the Sterling / Euro exchange rate under the current Government.
ASW Members believe that the Government has a moral responsibility to correct the serious injustice to members of the ASW Sheerness and ASW Cardiff final salary pension schemes. In addition, the Members believe that if the Government does not then it will mean that no matter what prescriptions the Government comes up with following the publication of its Pensions Green Paper late this year, current and future generations of British workers will lack the confidence to take responsibility for their own pension provision if they do not see that the ASW Members who had done just this have their prospects of security in retirement snatched away from them.
Benefits are uninsured and not covered by TUPE as contractual, even though the enrolment into the scheme has been encouraged by Government and treated as contractual by the Employer.
ASW Members believe that the final salary pension schemes were wound up precipitously to make it easier to find a purchaser, when they could have continued to operate, at least until the possibility of purchase and adoption by a new owner was exhausted.
In the case of the ASW Sheerness scheme, which was apparently healthy in terms of MFR, it could have continued under new ownership without financial penalty. It is clear that current laws make it far too easy to terminate pension schemes to prevent any potential future cost to a new owner.
The ASW Members believe that the Government has a precedent retrospectively protecting Company pension scheme Members who face the prospect of as much reduced income in retirement because of bad management and/or failures of the law, namely in the payment made to The Mirror Group pension scheme
Therefore, the ASW Members believe that the Government could and should restore the Sheerness and Cardiff Pension Funds to provide full promised retirement benefits to Members, as is the custom and right in other EU states such as Ireland.
In addition, ASW Members believes that the Government needs to state its intention to enforce the following actions in its forthcoming Pensions Green paper:
1) Pension rights to be considered part of TUPE (i.e. Contractual right) and a secured preferential payment in any wind-up situation.
2) Pension rights to be a first priority preferential secured debt in wind-up.
3) Pension rights to have full indemnity insurance of promised benefits in retirement, via a Central Discontinuance Fund, as in USA and elsewhere.
4) All scheme Members to have equal treatment in terms of agreed payment in a wind-up situation.
5) Companies should not be able to terminate pension schemes without providing an alternative investment route for protection of promised benefits.
6) The methods of selection and control of Independent Trustees to be tightly regulated.
7) Independent Trustee costs to be charged to the scheme owner (i.e. the Receiver, or the Company, in continuing operation) not charged to the pension fund.
8) Additional voluntary contributions (AVC’s) should be treated separately from any main scheme to allow early conversion into pension to avoid some hardship while the IT completes wind-up of the Pension fund itself.
9) Timescale for wind-up to be reduced, as it is over-long in terms of hardship caused to Members, who may well have lost both employment and TUPE rights through Receivership.
ASW Members, already in shock through receivership and the spectre of unemployment, are hurt and angry by the wind-up of their pension schemes, and are determined that some action be taken to recompense them for this legal robbery.
The ASW Pension Action Group believe that Government needs to use the forthcoming Green Paper on pensions to change the law so no other British workers have to go through what the ASW employees have in terms of threats to their pensions. In addition, the Action Group believes that the Government has a moral responsibility to restore the value of their promised pension benefits, thus restoring the prospect of security in retirement that the ASW pension schemes members have saved for and has been snatched away from them due to no fault of their own. Should the Government fail to do so, the ASW Pension Action group believes that not only will thousands of families suffer from the prospect of relying on the basic state pension alone for their income in retirement, but that current and future generations will not have the confidence to save for their retirement via company or personal pension schemes.
- - - - - - - - - - Accompanied by the following letter - - - - - - - - - - - -
15th October 2002
Please find attached a copy of the paper prepared by ASW Pension Action Group, comprising of representatives from the Company’s plants in Sheerness and Cardiff, summarising why we believe that current pension law needs to be changed. We believe that the law should be changed to ensure that no other UK company pension scheme members face the prospect, now confronting Members of the ASW scheme, of losing the security in retirement for which they have saved diligently during their whole working lives.
In addition, the paper outlines both, why the ASW Pension Scheme Members believe that the Government has a moral responsibility to provide funding to top up the two ASW pension schemes and, why it is in the long-term interest of the taxpayer that they do so.
Final salary pension schemes, when supported by a stable employer, have been one of the great success stories in providing security in retirement for British workers since the last war. However, successive Governments, including this one, have failed to ensure that employees, who take responsibility for their own pension provision, are adequately protected from mismanagement of their pension schemes.
The Government’s forthcoming Pensions Green Paper provides it with the opportunity to address these issues. However, if the ASW Members are left with a fraction of their expected pension income as a result of pension scheme wind-up, then current and future employees throughout the UK, will have no confidence that the occupational schemes provided have sufficient protection to be worthwhile. As a result, they will place the responsibility for their retirement provision back firmly on the State, diverting precious resources away from necessary expenditure such as education, the NHS and law and order.
The Government has the power to avoid this by assisting the ASW Members and changing the law to prevent such potential personal catastrophes from happening in future. The ASW Pension Action Group asks Government to evaluate these considerations and to make the right moral decision. Failure to do so will decimate the lives of thousands of families and lead them to severe hardship in retirement.
For ASW Sheerness Pension Action Group
Keith Plowman - Chairman and Employee
John Towill - Employee
Andrew Parr - Employee
John Hayter - Employee
Phil Healy - Employee and Member Nominated Trustee to the Fund
Peter Holsten - Employee and ISTC Branch Secretary
Pat Wiggins - Employee and ISTC Branch Chairman
For ASW Cardiff Pension Action Group
Brian Silver – Employee and ISTC EC Member
Peter Jackson – Employee
Paul Morgan – Employee and Member Nominated Trustee to the Fund
Chris Keating – Employee
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