Pensions Action Group


Press release from Dr. Ros Altmann
31st July 2006

The Parliamentary Public Administration Select Committee (PASC) has released a damning verdict, criticising the Governments rejection of the Parliamentary Ombudsman ‘Trusting in the Pensions Promise’ report and effectively threatening a Parliamentary rebellion if Ministers do not change their stance on this issue.  The Committee offers no support whatsoever for the Government’s position and demands that a proper compensation scheme must be put in place urgently.

It also expresses concern about what it sees as worrying recent trends for this Government to think it can reject independent reports which criticise its actions ‘with impunity’.  It suggests that Government departments focus on denying any wrongdoing – even in the face of clear evidence – rather than trying to remedy the injustices they have caused.  The PASC cites not only the DWP, but also the Treasury (Inland Revenue) which has rejected criticism of tax credits and the Home Office.
The PASC report is another unequivocal indictment of the Government’s handling of this occupational pensions scandal and the Committee is clearly outraged by what has happened and appears determined not to let the Government get away with it.
Journalists may also be interested to note that the PASC report states that the Government not only misled scheme members, but that the lack of honesty with which Government described the protection for final salary occupational pension schemes in its press releases, statements and official information, also misled the Press.  This meant that journalists were given a false impression, so that may have misled the public too.  It is surely vital that journalists can rely on information they are given.
The Government now has the chance, yet again, to reconsider its handling of this situation, which the PASC says has caused ‘outrage’ and to review its rejection of the Ombudsman’s findings of maladministration, which the PASC calls ‘unsustainable’ and ‘untenable’.
The victims of this huge injustice have waited for years and are still waiting for justice.  It is to be hoped that MPs from all parties will now unite behind the Parliamentary Ombudsman and their fellow MPs on the PASC, to force the Government to organise a proper compensation scheme, to replace the discredited, hopelessly inadequate Financial Assistance Scheme.
The Pensions Action Group will proceed with its Judicial Review of the Government’s unreasonable and unlawful response to its own Ombudsman, and the report from the PASC should prove very helpful in strengthening the case still further.  We hope, however, that the Government will agree to remedy this injustice without needing to go to Court.
Over 100,000 people have lost some or all their occupational pensions when their schemes wound up.  The Parliamentary Ombudsman conducted a 16-month detailed independent inquiry and found that the Government is responsible for the injustices suffered by these victims and that it should organise a compensation scheme urgently.  After Government rejected the Ombudsman’s report out of hand, the Public Administration Select Committee conducted its own investigation and has just published its conclusions, giving new hope to the victims of this situation. 
The following excerpts from the PASC report show the strength of feeling among the Committee members – many of whom are Labour MPs.  These quotes are worth reading:
Government misled the press, preventing accurate reporting
‘The general impression was given that occupational pensions were now safe.  Moreover the impression given by the Government influenced the wider press reporting on these matters, which in turn led to the perception that saving through occupational pensions was not merely financially advantageous but was in effect risk free’(p9)
The Government’s failure to provide clear information was one of the chief reasons why there was ‘a general sense out there’ that defined benefit occupational pensions were absolutely, rather than relatively, safe.’ (p18)
PASC issues veiled threat of backbench rebellion if Government stance continues
We trust that this report will act as a warning to Government’ (p32)  ‘If necessary we will seek a debate on the floor of the House’ 

‘The Government has recently been too ready simply to reject findings of maladministration apparently without proper study of the Ombudsman’s reports’
‘The series of rejections of Ombudsman’s reports is deeply troubling… the more so since such responses are not decided by departments on their own, but are raised in discussion across Government’ (p29]
PASC rejects Governments attempts to deny maladministration:
PASC says of Government’s defence that people should not have relied on its leaflets:  The Government’s claim that those reading the information would realise that they could not rely on advice given by the leaflet is untenable (p11)
PASC says of Government’s suggestion that the leaflets made clear people needed to take proper advice: The references they made to independent financial advice did not suggest that this was desirable, let alone necessary, and were cast in a way which would discourage rather than encourage the reader to seek it (p13)
PASC says of Government’s claims that trustees had primary responsibility both for ensuring schemes were properly funded and for communicating with their members:  This line of argument is unsustainable…The fact that others have responsibilities does not mean the Government need not take its own role seriously. (p17)  Trustees had no power in law to insist on additional funding above the MFR level (p17)
PASC says of Government’s claim that it should not have been expected to explain the inadequacies of the MFR in general guides:  In our view the nature of the MFR is not a matter of specific and detailed advice:  it goes to the heart of the legal framework intended to protect pensions at that time. (p14)
Government attempts to put the blame on trustees are not accepted:  It was not just for trustees to inform about the MFR ‘The Government should have been aware that the Minimum Funding Requirement was not properly understood by scheme trustees, let alone scheme members…Government should have realised that more clarification was required. (p15)
Committee insists Government must accept it is guilty of maladministration:
This is clearly maladministration’. (p33) ‘The fault lies with the Government not the Ombudsman’ (p34) ‘Government’s handling of the response caused outrage’ (p29)
It is maladministration, get over it and let us get on to engagement with the real issues here’. 
‘By concentrating its energy on denying findings of maladministration rather than on considering what remedies might be practical and proportionate, the Government has caused further distress to complainants’(p3)
‘We believe the Government is being, at best naïve, and, at worst, misleading’ (p33)

This is not just employers going bust – it affects solvent employer wind-ups too:
‘The Government cannot simply abandon such people, if it is impossible to make employers take responsibility, then it should do so itself ‘(p24)
The decision to weaken the MFR should have considered the effect on solvent employer wind-ups – ‘Government did not take account of all the implications’ (p19)

The facts of the case:
‘It was not obligatory for the Government to provide general information about pension schemes but, if it chose to do so, it was duty bound to ensure that information was complete and accurate’ (p9)
‘A proper level of accuracy in Government information should be a basic principle of good administrative practice.  For many years, the information provided on occupational pensions fell far short of this and of the Government’s own standard.’
‘There will be risks and hard choices involved in all investment decisions, including those about pensions.  The Government’s role should be to educate people about those risks’ (p17)
‘Scheme members were led to believe their pensions were entirely safe.  They did not have the opportunity to save in other ways and suffered heavy losses when their schemes wound up (p5) …denied information, scheme members continued to make additional voluntary contributions which proved worthless.  (p21)
‘We agree with the Ombudsman that the false sense of security it produced meant that scheme members did not take steps to spread their risks.  If official information had been adequate, members might have been able to reduce their losses’ (p20)

Government must organise a compensation scheme, not wholly taxpayer funded
We believe the Government should look again at what can be done.  We want a response that is not about defensiveness and denial…We expect the Government to work with others to put together a significant package of support…compensation, indexation and security for dependents benefits’ (p25)

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