Pensions Action Group


Minutes taken by Chris Panteli, Professional Pensions
7th September 2005

David Blunkett: You met with Stephen Timms didn’t you, just before the summer break and he reported back to me on what was clearly a very disturbing meeting for him as all these meetings are for you and I understand that very well. Any of the difficulties some of us have experienced in life is nothing compared to what you and people like you are going through.
So I think we should start off with the presumption that while sympathy is no good whatsoever to you we do understand and I hope you feel that people are trying to bat on the same side albeit you’ve not been able to progress as quickly as you would have wanted.

Ros Altmann: We’re all here today because the problems affecting these people have not gone away. They’ve been in this position for an number of years and, as you know, we’ve been trying very hard to persuade the government to understand that this is the fault of government. Not necessarily this government but successive governments, and unless and until the government does actually accept that it is responsible and must pay proper compensation to these people, the issue won’t go away. As far as I’m concerned it’s not just a question of social justice although of course that is paramount and that’s why I’ve spent so much time trying to help and each of these people will tell you their story if they may, to explain what has happened and why they are in this position. But it’s also from the point of view of restoring confidence and trust in pensions as a whole and in the government’s word in pensions.
If the government tells people that pensions are safe, assures them that any money they put in is protected by the law and in many cases offers a guaranteed pension and something goes wrong, and government doesn’t then say ‘look we made a mistake, we didn’t mean this to happen but it has, we have to make it up to you. We understand your pain, we understand your suffering and it’s not your fault, then I don’t see how we can expect people to keep trusting in pensions in future. As far as my work is concerned, obviously I want to restore some trust and confidence in pensions writ large across the economy.

DB: I am very happy to listen to each person individually but can I just set the scene. I have obviously familiarised myself since the beginning of May with the historic situation, what happened 10 years ago in relation to the MFR (minimum funding requirement), the challenges which have been launched – and I am very aware of the Ombudsman’s situation in relation to that – and other issues. And of course the obligation of ministers both to address the immediate problems and to be aware of their own responsibilities past and present.
The introduction of PPF and the new regulations which were brought in under the Pensions Act last year including the responsibility of trustees but also the actuarial assessment, the way in which the new regulator has been established are all a reflection of an understanding that none of us ever want a situation that you’re in to be in again and the question that we will be addressing over the months and years ahead is ‘is there more that can be done but doesn’t accept that government has to be responsible for picking up the pieces for everything on every occasion relating to these issues’.
That question is a difficult one because people do turn to government at times of great distress, understandably but if government are responsible for the immediate situation, we have an obligation to continue looking at what we can do.
Shall we go around in turn?

Barry Tilson: I joined Perivan when I left school at 15 and at 18 was told I had to join the pension scheme. I joined their final salary pension scheme which they said was protected by the government, that you won’t find a better scheme, that trustees have shopped around and they feel it’s the best option.
To cut a long story short I was there all my life, for 39 years and three months. The company then made us redundant in November 2003. Prior to that, in May 2003 they stopped the pension fund but said our pensions were still safe, they would be paying in to it, there’s no problem there but we’re not taking any new entries.
Three months later the company folded. I was six months out of work for the first time in my life and...

DB: How far off retirement?

BT: I’m 56 now, I got made redundant, and I’ve got no time to...

DB: You paid in from when you were 15?

BT: From when I was 18, for 36 years, and I’m absolutely devastated like everyone here today.

RA: He gets nothing from the FAS

DB: I understand that. Who’s next?

John Hayter: I sought gainful employment with ASW Sheerness in a steel foundry in 1974 and had to join the pension scheme. It turned out to be a very good scheme. I couldn’t get an alternative arrangement with a private provider at the time because of Inland Revenue rules.
Our pension scheme was governed by by government rules and regulations which my company obeyed to the letter.
This continued until 2002 when ASW went into receivership and as a consequence of that the scheme was wound up. My wife, my family and I now face penury through no fault of our own. We were told all the way through that our scheme was guaranteed safe – not only by our company but this was reinforced by the government throughout those years especially after Maxwell and the introduction of the MFR, and the MFR being our yardstick. That’s how we judged the health of our pension schemes.
But going back to 2000 the government was talking about the inadequacies of the MFR and how it should be altered/abolished, and meanwhile, your government lowered the threshold of the MFR twice since then.
Our pension scheme was 104pc funded at the time of wind-up. We know different now, but that told us that anything over 100pc was whole or substantial, not being pensions experts.
I understand that  the MFR was introduced to stop exactly what has happened to us. In fact it was that measure which let us down because the public awareness of the MFR was totally different to the reality of what it really was, to what government knew it was, what pension experts knew it was. And in between, the government lowering the threshold twice and the £5bn a year raid on tax has damaged our pensions beyond belief.
One one hand you were acknowledging that the MFR was inadequate and didn’t fulfil what we thought it would and then you lower it twice on the other hand and damage us even further. And throughout all this, no one ever warned us that there was any risk. Completely the opposite.

DB: I understand that, Mr Hayter. Who’s next?

Richard Nicholl: I’m a member of the FH Burgess pension scheme and...

DB: I think yours is a slightly different problem isn’t? They haven’t gone...

RN: Yes our company is still solvent. I joined the company when I was 19, joined the pension scheme when I was 20 and paid in for 27 years. The scheme went into wind up in 2000, by which time I was also a trustee. Like other people in our scheme, I am expecting around 15% of my pension. I am representing the other people from solvent companies and most scheme trustees faced a similar position when their fund was faced with closure. Most entered a compromise agreement, drawn up legally, which allowed some limited funds to be put into the scheme by the company involved, in return for cancellation of the deficit. This would be preferential to forcing the deficit debt, which would probably have forced the failure of the companies involved, with subsequent job losses. In our case the company has agreed a share of any profits for 10 years, and so has behaved reasonably well, and totally legally. The directors have all got their money in the same pension scheme so we are all in the same boat.

What I would say with regard to solvent companies is that various people have said that we should get the deficit money from the company involved. Even now most of the companies would go into insolvency if the debt was forced on them and the main point is that there’s no legislation that forces them to make up any deficit. Even the 2003 legislation has proved ineffective and we have APW and Henlys as proof of that.

We’ve made the point several times that any assistance would be made to the individual and not the company so the company’s not going to put in any money anyway so we feel we are in no man’s land. We’re not covered by the PPF, we’re not covered by the FAS we’re on our own and it seems the government wants it both ways. There’s no assistance and there’s no legislation to force the companies to pay even if they could.

DB: I’d like to come back to you, perhaps you could drop me a line on that last point, because if there’s measures that can be taken to improve the regulation in circumstances like your own then I would be very happy to talk to the Chancellor and to other colleagues about that.  Who’s next?

Alan Marnes: I was a member Samuel Jones scheme for 36 years before it closed. I started there at 15, I put in about £36,000 of my own money into the scheme. That money must now be passed on to an annuity provider which will not provide for me or my fellow workers. It will be given to somebody else as the government says it must.
I can’t see myself at the age of 54 being paid anything out of the FAS. We have one widow in our scheme who was promised the opportunity of early retirement the Christmas before our scheme folded. She has not received one penny from anywhere for her husband’s contributions. I’m very disappointed that the government still continues with the push to make insolvent schemes buy annuities.

DB: Have the trustees...

AM: I am a trustee.

DB: Have you as trustees been given very clear advice that the only way of securing a definite commitment over the years ahead is to go for the annuity.

AM: For those that have already retired. There isn’t any money left for us who are yet to retire. Not a single penny.

Tony Brown: I was with Dexion Hemel Hempstead for 29 years. The company became insolvent in June 2003 and the pension fund had a deficit of £20m. After the Maxwell fiasco the previous government put in legislation which we thought to benefit and help people for the future. Soon after Labour came to power, Gordon Brown introduced a stealth tax which took £20,000 a year out of the Dexion fund.
This government twice lowered the MFR at a time when, because of falling annuity rates, it should have been increased. Even your own Frank Fields told this government some years ago what was required to provide compensation to deferred pensions members by using the unclaimed assets. This government, through various departments, misled us in booklets as late as 2003, which referred to pensions as being safe and protected by law. This government then introduced the so-called Financial Assistance Scheme with a proposed £400m over 20 years. This came just before an election and to gain confidence within their own party, many of whom now believe the pensions problem has been finalised.

John Benson: I worked for ASW Cardiff for 41 years. Since losing my pension I’ve been on the verge of a nervous breakdown, nearly lost my marriage, I had to turn down an operation because I would have been off work for six months. Had I received my pension I would have been OK.
I can’t believe, Mr Blunkett, that this government has spent £500m a year on a war in Iraq, £4.5bn compensating farmers, hundreds of millions every year helping asylum seekers, even making tens of millions of pounds in shortfalls up in their own pension schemes, even making retrospective payments, and not help us.
Our only crime was to do what we were told by you people and you’ve totally let us down Mr Blunkett. I’m very sorry but I have to say it – this government, a Labour government which I’ve supported all my life, has totally bloody let us down. I’m sorry for swearing but that’s the way I feel.

Others: Here here.

DB: Mrs Cheshire.

Marlene Cheshire: David worked for Dexion for 31 years, became very ill in March 2003, the firm went down in June and things just went from bad to worse. We’ve been promised by Malcolm Wicks and Tony Blair that terminally ill people would receive their payments but I’ve had nothing.
David died on July 5. Two hours before he died I told him that we’d got the pension, just to let him go in peace. And that’s made me so, so angry. I’ve not received a penny.

JH: That a terminally ill man felt the need to protest in the street to try and obtain justice in the UK today is a disgrace.

RA: These are good people, these are decent people. They are the bedrock of our society and have done what they were told and they trusted the system.

DB: Of course they are. I’ll try and address the issues but I’m not going to get involved in a party political argument this afternoon, it wouldn’t take us any further.
I think we must assume that I have as much goodwill, Ros, as you do, care as deeply for the people round this table as you do. 
Mrs Cheshire, we commenced the (FAS) unit last week. Trustees need to get in scheme details very quickly and we can make the interim payments as quickly as we can. The task now is to ensure the FAS unit does its job, but this is not solving the broader problem, I’ll come to that in a minute. For those who are outstanding like yourself as a widow, it is crucial that the scheme gets in the details to the FAS. I’ve already indicated that they’ve absolutely got to give priority to those in danger of dying before they get the scheme, in the same as David did, and to those who are bereaved in this same way you are. We need to do that as quickly as possible this side of the New Year.
We understand the anger that the MFR set up in 1995 did not achieve the results that the previous government wished it too. I understand that. I think they did so with goodwill and I think what’s happened since was done with goodwill. I don’t think there’s been a single minister or official who has somehow acted in bad faith.
Clearly things have gone very badly wrong and the collapse of the £250bn that was wiped off the capital markets four or five years ago was a dramatic and devastating impact on the actual value of what was previously seen – understandably – by trustees as being sufficient security.
I’ve got to try and work out, in the months ahead, whether there’s anything more we can do over and above the new regulations, the regulatory body, the PPF and the limited help – I accept that it is limited – that the FAS is providing.
I want from this afternoon to have positive ideas back on how we might address those issues. There’s no point in saying that we can pick up the pieces in every eventuality in every collapse of a scheme. We just cannot do that. It’s not open to government to be able to do that – not just because it’s not feasible within pensions but because the same demands would be made for insurance and all sorts of other commitments.

RA: It’s not the same.

DB: I do know it’s different, which is why I’ve just said ‘within the parameters’.
We’ve already given a commitment, my predecessor fought like hell to get a limited scheme up off the ground, my immediate predecessor indicated that obviously in terms of the finances that would be required we need to look at this as part of the broader spending review. I’m indicating this afternoon that it’s ideas on how you can deal with the tragedies that have been enunciated around the table, where people have paid in for very many years and then seen absolutely nothing at the end of it their foregone wages disappearing, how we can look at what the cost can be, what the liability might be, separate from the attack that’s been launched, Ros, on whether we were liable as government past and present.

RA: I’ve been trying to do just that for the past three years, secretary of state.
I’ve spent so much time working out how this could be done at minimal cost to the taxpayer, because obviously we understand that the taxpayer’s money is precious and has to be used wisely...

JH: Excuse me Ros, we are the taxpayer. We are not divorced from being taxpayers.

RA: No of course John, I quite accept that. But if the schemes were to use the assets that they currently have – or did certainly have two years ago when we started this exercise – pensions could be paid out on an ongoing basis and could have been paid out for the last two years. There is money in the schemes, there is money in the bank to pay these pensions. ASW has got enough money in it to pay for 15 years before the government need to top it up.
Other schemes have got enough money for at least seven to eight years, paying pensions as they become due – full entitlements – for everybody. If you do it on an ongoing basis one of the big problems is that if the schemes give the money to an insurance company to buy bulk annuities today, first of all there’s only one provider left in the market pretty much, so the value has gone down, second of all you’re giving away the next 30 to 40 years’ of pensions money now, and there’s nothing left to pay pensions on an ongoing basis. If we minimise the cost to the exchequer by doing this year by year as pensioners come to you, then people come, they claim their entitlements. If you have cut-offs and so on I’ve suggested we can try and work out a scheme. It will cost less than £100m a year but you need that ongoing commitment that that money will be there. The taxpayer can afford it and I believe this country must do it. It needs to be done in a different way from how the FAS is working.

DB: Well you’ve put your finger on the issue of where you make cut-offs. Wherever we make a cut-off you end up with people outside it. You sometimes miss it by days. There’s going to be tragedies wherever we draw the line and if we don’t draw the line it leads to unlimited liability.

JH: The injustice occurs because you’ve now drawn up another set of rules that some people are in, some people are out, and we have to jump through hoops to actually be eligible for this FA scheme. I think we are the result of government inaction back in 2000. The right thing wasn’t done then, and what you’re saying this afternoon is that the right thing is going to be done now.

DB: I haven’t said anything. I’m trying to listen to you rationally and take on board your the heartfelt plea you’re making. I’m not interested in an antagonistic debate.

RA: I’d like to concentrate on the positive, secretary of state and I’m so encouraged that you’re asking and listening because I do believe this offers a realistic solution. This is not an unlimited liability. This is a defined group of people who, since 1997, have been so badly affected.
Now I originally thought that perhaps what the government was saying was ‘we can’t do anything right now, we have to wait for the PPF to come in’. Before the PPF you would have had an unlimited liability because there would have been no end point but we now have. It’s not an unlimited liability because there won’t be any more schemes to join them. You start in 1997 and you finish in April 2005. That’s it. These are the only group of people who were told by government that they would get a specific level of pension out of their scheme. Anyone in a personal pension or insurance arrangement was never told ‘this will deliver you X’. These people were. We haven’t even talked about the portion that the government called a guaranteed minimum pension which they’re not even getting – that came from their contracted out state rights. This whole thing is an area we could settle.

DB: I do know what a trauma and a history the whole pensions system has been. Understandably we’ve concentrated entirely one area today but we’ve been picking up the pieces on pensions mis-selling since 1997 to the tune of £11bn.

JH: We feel that we are not valued.  If we were valued, you would sort this situation out tomorrow. But we have no value.

DB: Well I think my predecessor but one, Andrew Smith, did value you and fought like hell to get the FAS scheme off the ground. It may not be adequate and it may not be what you wanted but it certainly took a big effort on his part and he did care about it.
I think we need to look at the regulations in relation to those schemes that are still solvent that are causing difficulty which we referred to.

JB: We are putting our trust in you Mr Blunkett.

DB: Yeah well I’m not going to be able to work miracles. I’m prepared to listen and prepared to go back and look at the issues that we’ve debated. What I’m not prepared to do is to make a promise that turns out to be false. I think you’ve had enough of false dawns.
I’m glad we’ve got the thing (FAS) up and running now. The issues we are raising this afternoon are obviously the profound ones for the future. What I’m saying to you is I’ve listened. I’ve taken on board entirely what you say, every single one of you I accept has had a raw deal. I accept that there are thousands of people out there that have had the kind of heartbreak that has been described this afternoon, including those like the gentleman on your left Ros...

RA: John Benson

DB:...Who has worked for 41 years and suffered health and family problems as a consequence. All of that I understand and I feel.
I think if we presume that there’s no magic wand but that I’m not ignoring what you’re saying we might leave the room with a degree more fellow-feeling that you came into it with. I felt that when you came in, you felt that government didn’t give a damn and wasn’t listening. And we are.
What we also need to do is be absolutely clear with everyone just what particular thresholds would cost. I think we’ve all accepted this afternoon that whatever happened in the future of the FAS, when you move the goal posts there will still be people outside it. We need to be clear about what the costings would be on those so we don’t delude ourselves. I think we should start from that and I would happily talk to the chancellor about what the implications would be.

RA: The longer this gets left unsorted, the higher the costs become. The more schemes that give their money to the insurance companies to buy the annuities, the higher the cost will be for taxpayers. My plea has always been to get schemes to the point of wind-up but not buy annuities. At least we will have all the information but we wouldn’t have given away all the assets. So far that’s fallen on deaf ears.

DB: Well members of parliament have approached me on that specific issue over the summer and I’ve met with them and talked with them about it.

JH: I fail to see how you can restore trust in pensions – and politicians for that matter – when this issue remains unresolved.

DB: Well I think it would be a lifetime’s work to restore trust in politicians I fear, Mr Hayter, but I feel it is my job to ensure that, whatever we do with pensions we do restore confidence.
I’m very grateful to everybody this afternoon, I’m grateful for the way you’ve approached this meeting. I’ve indicated that I’m not simply sitting here and saying ‘that’s it, there’s nothing more that can be done, please go away’. I wouldn’t want to do that and again I repeat, there’s no point in making false promises, you just create even more disillusionment. But I will take away what’s been in said and I will keep in touch with you.

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