Pensions Action Group



PAG press release
13th July 2006

In response to the Advocate General’s announcement in the ECJ Dr Ros Altmann says:  ‘We would like to reassure people that the EU judgment will have no bearing on our fight to remedy this huge social injustice.  The Parliamentary Ombudsman’s report clearly showed the Government is responsible and we call on all MPs and trade unions to press the Government to uphold her report.  The problem is not insolvency, it is the wind-up of a scheme.  Many workers lost their pensions even when the employer stayed solvent.’

We understand how disappointed ASW workers will be that the European Advocate General has not found in their favour but that will not stop the fight for pensions justice.  The Pensions Action Group represents every worker who has lost their pension between 1997 and 2005 including those in solvent employer schemes who would not have been covered by the EU Insolvency Directive anyway. 

The Parliamentary Ombudsman’s independent 16-month inquiry found that the UK Government is responsible and should organise compensation for those affected.  MPs who asked the Ombudsman to investigate should now press the Government to comply with her report.

The rules of wind-up and the inadequate oversight of the funding regime for UK final salary pensions are the fault of the UK Government and no-one else.  In addition, the Ombudsman’s report showed that maladministration by successive Governments was also the cause of people being unaware of the wind-up risks, because Government was not honest with the public.  Official information – which Government itself chose to issue (it did not have to) encouraged people to join their employer scheme and told them their pensions were safe, while failing to mention the risk of wind up which Government rules had created.  Effectively, the Government mis-sold these pensions to the public and must compensate for their losses.

This is a problem which the UK Government has created and it is one which MPs must force the UK Government to put right.

We don’t need to go to Europe to sort out our problems, the Parliamentary Ombudsman has shown MPs the way here.  If MPs believe in social justice, fairness and decency, they will pressure Ministers to own up to their mistakes.  So far, the Government’s rejection of the Ombudsman’s report is a disgrace.  Mr. Hutton’s statement in Parliament, denying any wrongdoing, contains factual inaccuracies and is not honest.  The Pensions Action Group will proceed with a judicial review of the Government’s response, if the DWP does not admit its mistakes and agree to compensate properly for the damage it has caused. 

Social justice and fairness are at stake, as is the integrity of our Parliamentary constitution.  Not only this, but if we are to have any hope of restoring confidence in pensions and in Government’s word, this issue must be resolved.  We call on all MPs to protect the rights of their constituents, in the face of a Government which is trying to walk away from the damage it has caused.  Will MPs stand up for what is right or let Ministers get away with dishonest behaviour?


1. Between 75,000 and 125,000 people have lost some or all their pensions when their company scheme wound up.  
2. The Government removed dividend tax relief from pension schemes in 1997, which took money out of the funds and also drained liquidity from the stock market, thus worsening financial losses for pension scheme members.
3. The Government introduced new rules for pension scheme wind-up in 1997 and resulted in workers’ pensions becoming far less secure than they were before.  The law interfered with these schemes and has over-ridden trustee discretion. 
4. It was not trustees who were responsible for the wind-up of the scheme, or the rules of wind-up, it was the Government.  The unfair priority order, which prevents trustees from dividing the assets fairly, the inadequacy of the funding regime and the framework of pensions policy in the UK – all of which are Government responsibility - caused the losses. 
5. The Government always assured the public that the Minimum Funding Requirement would ensure sufficient funds in schemes to pay accrued pensions on windup – that was supposed to be the original policy intention. 
6. In reality, however, the MFR started off too weak (because, behind the scenes, the Government designed it only to give workers a 50/50 chance of actually getting full pensions if the scheme wound up).  The MFR was allowed to weaken significantly from the initial level, while Government ignored the implications of this for member security on wind-up. 
7. The Parliamentary Ombudsman showed that this maladministration puts a clear responsibility on Government to compensate those who have lost their pensions in what they were always told by the Government were ‘safe’ pension schemes which were protected by law.  In reality, it is these laws which actually removed security that was there before, but the members were never warned and were therefore denied any opportunity to protect their families and their retirement security.

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