The shocking plight of naked campaigners
by David Budworth The Times 26th September 2009
(just before the 2009 Labour Party Conference)
It is with great sadness that I have to announce that at 1pm on Tuesday a group of ageing men will take off their clothes outside the Labour Party conference for the sixth year running. I despair not because of prudishness — the human form comes in many wonderful shapes and sizes — but because they are still having to resort to such eye-catching and bone-chilling tactics.
The naked campaigners, members of the Pensions Action Group (PAG), have only one aim: to obtain justice for the estimated 140,000 workers who lost all or part of their pensions when their employers folded.
After a five-year fight, they thought that they had secured victory in December 2007 when the Government announced the introduction of a revised financial assistance scheme (FAS). This promised that those affected would receive 90 per cent of their pensions. But nearly two years later the group say that they still have not received the full amount to which they are entitled. Clauses in the scheme mean that many will not receive anything like the level of compensation that they had been led to believe was coming their way.
Tuesday’s protest will focus on the lack of protection against inflation. This means that the benefits received from the FAS are eroding in value with each year that passes. If, as some economist argue, we could soon be in for a nasty inflation spike, the PAG fears that the 90 per cent promised will be worth nearer to 50 per cent in real terms.
But this is not the only injustice. One of the cruellest clauses excludes compensation from those who are over 55 and in poor health but more than five years from “normal retirement date”. Many feel that they are forced to carry on working even though they should retire on health grounds.
It is time that these shortcomings in the FAS were addressed. I hope this is the last time that we see these campaigners stripped of their clothes.
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Government loses pensions case at Court of Appeal
By Yvette Essen, Pensions Correspondent
The Government has suffered a major blow with the Court of Appeal upholding a ruling that it mislead 125,000 people who lost their pensions when their companies collapsed.
Three Appeal Court judges unanimously agreed that the High Court correctly ruled that government leaflets had encouraged thousands of people to join and stay in company pension schemes. Last year, Mr Justice Bean upheld findings by the Parliamentary Ombudsman that the Government did not mention the risk that people would only get a fraction of their pension pay-outs if their schemes were voluntarily wound up or their company became insolvent.
A spokesman for the Department of Work and Pensions said it was considering seeking an appeal to the House of Lords in an attempt to get the judgement overturned.
The spokesman also said that last December the DWP had made a "significant settlement" by adding an extra £935m to its Financial Assistance Scheme, which provides compensation for around 140,000 who lost their pensions. The Government has contributed a total of £2.9bn to the FAS.
Dr Ros Altmann, who is campaigning on behalf of the four pensioners bringing the test case, described the Court of Appeal ruling as "another crushing verdict against the Government."
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Mail on Sunday 30th December 2007
Please applaud these pension fighters
By Jeff Prestridge, Financial Mail Personal Finance Editor
For six years Financial Mail has campaigned tirelessly on behalf of those who saved into works pension schemes only to see the prospect of a comfortable retirement disappear. This happened because their employer folded or, more cruelly, simply walked away from its pension scheme obligations. More than 140,000 people have seen their pensions vanish in this terrible way.
We campaigned because we believed it was an outrage that someone could save diligently and prudently into a works pension, only to lose everything.
After all, a pension promised should be a pension delivered.
We travelled the country listening to those affected by this travesty. We demanded answers from ministers who were more prone to sitting on their hands than sorting out such an injustice, and marched with protesters.
Though it has taken a lot longer than it should, it seems these 140,000 victims of failed pension schemes will now receive richly deserved justice.
If the Government keeps to the promises it made 13 days ago, legislation will be brought in during 2008 to ensure that all victims of failed pension schemes - irrespective of when they failed - receive 'fair' and prompt compensation. They will get 90% of what they should have got if their scheme had remained intact. They will also receive a pension at the date the original scheme said it would be paid - no later.
There are many who deserve applause for getting the Government to see sense. First of all, there are the wonderful members of the Pensions Action Group who refused to be subdued in their quest for the 'right' result.
Led by the indomitable Peter and Jacquie Humphrey, John Benson and Andrew Parr, PAG members never stopped publicising their cause.
They stripped at political conferences, shivered through all-night vigils outside Number 10 and brandished banners opposite the Houses of Parliament. Without their resilience, the Government would never have listened.
Then there are those who, despite personal tragedy, fought for the cause. Marlene Cheshire's husband Dave died in 2005 without seeing a penny of the £10,000-a-year pension he built up through 30 years of hard graft at Dexion, his Hertfordshire employer that collapsed in May 2003. Rarely did a pensions protest go by without Marlene being there.
There are also those, too numerous to mention, who allowed their stories of pensions woe to appear in the pages of Financial Mail. It ensured the campaign continued to receive vital publicity.
But probably the individual most responsible for getting the Government to end this gross injustice is Dr Ros Altmann.
For five years, Altmann, once an adviser to Tony Blair, has been magnificent in co-ordinating the work of the PAG, publicising the stories of victims of failed pension schemes, and striding the corridors of Whitehall to get the Government to offer proper compensation. Without her efforts, it is unlikely the Government would have provided extra funds.
Let's hope the Government delivers its promises. We can then draw a veil over this debacle and start believing again in pensions saving.
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'Justice at last' for 'robbed' pension workers
Daily Telegraph 18th December 2007
The Government’s decision to provide a £2.9bn rescue package for workers who lose their pensions after their employers went bust was met with an overwhelming cry of “justice at last” by those affected.
Marlene Cheshire, a 63-year old widow said she was overjoyed to hear the news. Her late husband, David, worked for the shelving company Dexion for 31 years before it collapsed, taking his pension savings with it. He was supposed to retire in October 2004 on a pension of £10,000 a year. At present Marlene receives barely one tenth of this, getting £18.50 a week after tax from the Government-funded Financial Assistance Scheme. This should now significantly increase.
Peter Hain, the Work and Pensions Secretary, said the money would deliver justice to workers “cruelly robbed” of their pensions “through no fault of their own”.
The Government has come under increased political pressure to pay more generous compensation to those who lost their company pension schemes. It has been severely criticised by both the influential Parliamentary Ombudsman and the Public Adminsitration Select Committee for publishing “misleading” leaflets and literature that suggested that final salary pension schemes were guaranteed.
The Pensions Action Group, which represents those who have lost their pensions, has also brought two successful legal cases against the Government, both in the high court and in the European Court of Justice. Hain said that the additional money should ensure compensation available under the Financial Assistance Scheme will now be in line with the payments made through the Pensions Protection Fund, an industry-funded scheme that was set up two years ago.
Payments will be backdated to May 14 2004, when the FAS was first announced. The PPF only covers pensions scheme that collapsed after April 2005, when new pension rules came into force, and offered more generous compensation than the FAS. But it is understood that those who qualify for an FAS payments will now be entitled to 90 per cent of their expected pension, rather than just 80 per cent of a narrower Government-defined “core” pension.
The maximum payout will also be increased to £26,000 In addition payments will now increase in line with inflation and workers will, where appropriate, by able to draw a lump sum.Those who are unable to work because of ill-health will be able to apply for an early payout. Hain added that this settlement will benefit 130,000 workers already eligible for the Financial Assistance Scheme.
It will also cover another 11,000 workers who are members of failed pension schemes belonging to solvent employers. These had previously been excluded to payouts from the FAS.
Final details will be confirmed in the New Year when the Government will bring forward the necessary legislation to make the changes. Mrs Cheshire was at home this morning when she heard the news and said: “I am over the moon and cannot stop shaking as I am so emotional.”
The extra funding means that she will be able to give up her cleaning job which she took on to make ends after her husband died two years ago. “It has been frightening as I’ve not known how I was going to pay for rising household costs such as gas bills. It has constantly played on my mind.” Mr Cheshire had prostrate cancer for years but earlier this year, his wife claimed: “The stress from all this worry killed him in July 2005.” She said: “He was supposed to retire in October 2004 on about £10,000 a year but he never saw a penny. “We were struggling because I had to look after him. When Dave knew he was dying, he kept worrying about what I was going to do afterwards and so I lied to him and told him our pension had been restored.”
Timeline, The long road to pension victory
The Government announces it will set up the Financial Assistance Scheme (FAS) a “safety net” to help to those who lost pension benefits following the collapse of their employer. It will be funded by the Government, and will pay limited compensation to people whose pension scheme collapsed between Janaury 1997 and April 2005.
This follows a number of companies going into receivership, leaving their employees with no pension provision, including steel company ASW and Scottish engineering firm Blyth & Blyth. Although many of these schemes met minimum funding requirements, workers who had not reached retirement age effectively were left with nothing. In some cases workers who were just weeks away from retirement lost up to 30 years contributions.
- The Pension Protection Fund launched. This is funded from a levy charged other pension scheme. This covers any scheme that collapses after April 2005. At launch it offers far more generous benefits that those available through the Government-funded Financial Assistance Scheme.
Publication of damning report by Parliamentary Ombudsman, Ann Abraham into the issue. She found the Government guilty of “maladministration” after they misled the public about the security of final salary scheme. Within minutes of its publication minsters took the almost unprecedented step of “rejecting” her 254-page report.
The influential Public Administration Select Committee published critical report on the issue and orders ministers to accept findings of the Parliamentary Ombudsman’s report and pay proper compensation to workers who have lost company pensions.
First payments made under the Pension Protection Fund.
The European Court of Justice found that the UK Government broke EU law and that the actions of British ministers was found to be “unlawful and inadequate” by failing to protect these workers’ pensions.
Government loses judicial review in the High Court. Reviewing four “test” cases Mr Justice Bean supported the Parliamentary Ombudsman’s findings and urged ministers to reconsider plight of those who lost company pensions.
He concluded that Ombudsman was right to conclude that official leaflets which described such pensions as “guaranteed” were “inaccurate, incomplete, unclear and inconsistent”. Government announces it will appeal ruling.
Government actuary Andrew Young asked to report on the best way to use the assets of failed company pension scheme to benefit previous members.
Appeal of previous court ruling heard; still awaiting the judge’s verdict.
Dec 17 2007
The Government finally announces £2.9bn rescue package for pensioners. This should boost the compensation available to 130,000 workers under the Financial Assistance scheme.
This should ensure payments are in line with the compensation available under the Pension Protection Fund. A further 11,000 workers who are members of ailed pension scheme belonging to solvent employers will also benefit.
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Daily Mail 1 October 2007
Tories' new pledge to pension fund victims
By Ian Drury, Political Reporter,
Victims of pension fund collapses would be compensated within three months of the Tories returning to power, it was announced last night.
Pensions spokesman Chris Grayling pledged to set up a £30m-a-year 'lifeboat fund' to help those facing hardship after retirement schemes collapsed.
More than 125,000 victims lost all or most of their savings after heeding misleading government advice on final salary pensions schemes.
Despite being instructed to pay compensation by the Parliamentary Ombudsman and the High Court, ministers have stubbornly refused. Instead, they have made just 2,000 derisory payments averaging a pitiful £2,000 under the much-criticised Financial Assistance Scheme, a so-called 'safety net' established to protect those whose pensions were wound up between 1997 and 2005.
Last night Mr Grayling vowed that the Conservatives would take action on 'day one' of winning the keys to Downing Street to right the 'outrageous injustice'. He promised to introduce an instant rescue package which he claims would not hit the taxpayer because it could be funded by unclaimed investment assets.
He said a Tory Treasury would agree to a £30m loan so victims could receive their proper pensions while the 'lifeboat fund' was being set up. Pensioners would begin receiving money within 90 days of the Conservatives assuming power at a general election. Mr Grayling declared: 'Gordon Brown still denies there's anything wrong with our pensions system but his fingerprints are all over the scene of the crime. 'I've met many of Gordon's pensions victims. Can you imagine working for 40 years, saving for 40 years, looking forward to retirement then suddenly, one day, without warning, your dreams and future are shattered? 'There are people now working beyond retirement, some with serious illnesses like cancer or heart disease, some being forced to sell their homes. 'I give this commitment to all pensioners who have lost their pensions under Gordon Brown: We will make the first compensation payments to pensioners within three months of taking office.'
Mr Grayling said if the results of a sweep of unclaimed investment assets in Ireland was used as a marker, the UK could rake in over £250m in the first year and £70m a year after that. In February, the High Court declared that Government literature gave workers the false impression their savings were safe and said they deserved 100% compensation.
Ministers argue they have set up a Financial Assistance Scheme (FAS) to protect those whose pension schemes PS collapsed between 1997 and 2005. But apart from compensating no more than 2,000 victims, it gives them only 80% of their 'core' pension - in reality, about 65% of the total expected because it is not inflationlinked and does not have ill-health and dependants benefits.
Under Tory plans, victims would receive 90% of the whole total - in line with the more generous Pensions Protection Fund established to help those who lost pensions after 2005.
Labour was accused in July of 'putting two fingers up' at thousands of pensioners after it used a rare Parliamentary procedure to kill off proposals for the 'lifeboat fund'.
Dr Ros Altmann, pensions expert and an ex-Downing Street adviser, said: 'It is enormously welcome that the Tories have committed themselves to righting the dreadful wrong that has been done to tens of thousands of people. It must be done swiftly before more people become seriously ill or die while living without the rightful pensions that they worked so hard for. 'Labour said it would set up a scheme to help people who needed it most urgently. Three years down the line the vast majority have not been paid a penny.'
In one typical example, engineer Andrew Parr, 63, from Sheerness, Kent, learned that his pension pot would fall from £15,500 a year to just £4,800 after his company's scheme collapsed. He has been forced to postpone his retirement for three years and continue toiling at a steelworks to build this up to £9,500 - still £6,000 a year short.
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Daily Mail 26th September 2007 Pensions: This naked injustice
By Tony Hazell,
If you happened to be strolling along Bournemouth beach yesterday, you'd have seen a group of men, not quite in the prime of life, baring their all to bring attention to their predicaments.
That these men should be strolling naked on the beach for the fifth consecutive year is a searing indictment of this Government's indifference to those who followed advice to save for retirement. For all Labour's rhetoric about creating a fairer society, it is an indisputable fact that there is nothing fair in the treatment these people have received.
They were misled by Government and regulators regarding the safety of their pensions, they were let down in the most appalling way by employers who either lost or plundered their money, then they were ignored by those elected to represent them. And at every turn, any concession offered by the Government has had to be wrung out of it.
It has been suggested by some that there is no difference between those who lost money in collapsed company pension schemes and savers who panicked about Northern Rock. Actually, there is.
There has never been any ambiguity over the fact that the maximum compensation on savings account is (an inadequate) £31,700. Those saving into company pension schemes were, on the contrary, given the impression that all of their money was safe.
It is typical of the shamelessly opportunistic way this Government courts publicity that ministers sprang into action to guarantee Northern Rock deposits — just as they leapt in front of the cameras when Farepak collapsed.
What senior Labour politicians have against the workers hit by collapsed company pension schemes, I have never understood. Nearly every issue I cover has arguments on both sides, whether it be endowment mis-selling or bank charges. But I have yet to have a single person suggest to me that these workers deserve anything less than full compensation.
The cost to the taxpayer is minimal, especially when compared with the burden of underwriting public sector final salary pensions, which every taxpayer must do whether they like it or not.
Work and pensions secretary Peter Hain has hinted the Government could offer more money. It may just be that the prospect of being pursued through the next election by a gang of bare-bottomed pensioners is preying on the mind of our new Prime Minister.
And if stripping is the only way to get what is rightfully theirs, then all power to their flesh.
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Daily Express 26th September 2007
Pensioners Barrack Kinnock
By Alison Little
Lord Kinnock was caught up in an extraordinary row yesterday where he was shouted down by protesters in underpants who called him a “Welsh windbag”.
The bizarre scenes came as the former Labour leader went to meet around representatives of 125,000 people who have lost all or most of their savings in Britain’s pension fund fiasco.
Many were wearing only their underwear – to show how they had been “stripped” of their pensions and left without compensation from the Government.
Lord Kinnock was brought to meet them on Bournemouth beach by of one of the group who wanted to enlist his support. But things turned sour when he tried to empathise and suggested no other Government had tried to do so much to help them. The incensed protesters raged at him, saying he had voted in the House of Lords against a rescue package proposed by the Tories. Some shouted: “You’re a disgrace, you Welsh windbag.’’
Lord Kinnock eventually strode away, demanding testily: “Why didn’t the Tories do something in their 18 years in government?’’
The workers’ plight was highlighted by what is believed to have been the first fringe meeting ever organised at a Labour conference by the Conservative Party. Leading it were pensions spokesman Chris Grayling and Bournemouth MP Tobias Ellwood.
Mr Grayling wants Mr Brown to adopt an instant rescue package which he claims would not hit the taxpayer because it could be funded by unclaimed investment assets. He said: “The Government is willing to intervene if the problem is immediate and political, so last week we saw it ride to the rescue of depositors in Northern Rock even though there was never any real risk of them losing their money. “Why won’t it do the same for those who have lost pension funds?”
A review by the Parliamentary Ombudsman has declared that Government literature gave workers the false impression that their savings were safe, whatever happened – and said they deserve 100 per cent compensation.
The Government set up a Financial Assistance Scheme (FAS) for those whose final salary schemes went bust between 1997 and 2005, but it has paid out only £4 million to some 2,000 people so far, covering only 80 per cent of the ‘’core’’ pension they had expected. It does not cover those whose employers are still solvent. There is a more generous protection scheme for those who lost pensions after 2005.
Andrew Parr, 63, told how he lost almost half of the £15,500 a year pension he expected to receive when the Kent steelworks he worked at when into receivership in 2002. He said the stress of it all had led to him suffering a heart attack. Others had to sell their homes or had even committed suicide. He added: “The effect of losing your pension is one of the most devastating things that can happen to you.’’
Pensions expert and former Downing Street adviser Ros Altmann told the meeting: “This is the worst pension scandal the UK has ever seen. “We heard on Monday from the new Prime Minister about British values. These values have been violated by his handling of this scandal and his abandonment of those whose lives are in ruins because they did what the Government encouraged them to do.’’
Mr Brown dodged the protest by darting into his car when he spotted the demo.
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Telegraph 21st September 2007
Pension victims accuse Government of hypocrisy
By Alistair Osborne, Business Editor
The Government has been accused of "breathtaking hypocrisy" after giving a £21bn guarantee to the savers in Northern Rock while refusing to compensate the victims of other financial failures.
Campaigners for the 125,000 pensioners in occupational schemes who lost millions of pounds when their companies went bust and for policyholders in Equitable Life, which crashed in 2001, slammed the Government for its double-standards. Both cases, they claimed, demonstrated similar regulatory failings, particularly by the Financial Services Authority (FSA).
Ros Altmann, a governor of the London School of Economics and campaigner for the 125,000 pensioners, said the Northern Rock bail- out "shows that this Government's treatment of the victims who lost their pensions after believing that their money was completely safe and protected by law – because that is what the Government repeatedly told them – is unacceptable".
The pensioners were members of final salary schemes which failed after 1997 but before the Pension Protection Fund came into force in April 2005, offering 90pc protection. Rulings from the Parliamentary Ombudsman, Ann Abraham, in March 2006, the European Court of Justice in December 2006 and the High Court in February this year have all blasted the Government's handling of the affair. Yet, Ms Altmann said, the Government continues to refuse to come up with the relatively small sum of "£10m or so a year" to provide workers, such as the 1,000 Allied Steel & Wire employees, with their pensions. She stressed that booklets published by the FSA had told workers that their occupational schemes were safe, with one saying: "You are guaranteed a certain level of pension when you retire."
When asked by MPs last year to defend the use of the word "guaranteed", then FSA chief executive John Tiner said: "When we said that they were guaranteed, we didn't mean guaranteed under all circumstances" – a position the FSA reaffirmed last night. Ms Altmann said such dissembling by the authorities explained the queues outside Northern Rock branches yesterday even after Chancellor Alistair Darling's "guarantee" to savers on Monday.
"The one thing that comes through loud and clear is that, whatever the Government says, we don't believe them," Ms Altmann said. "Ten years ago if a Chancellor had stood up and said, 'don't worry, you don't need to withdraw your money', that would have been good enough. It's not good enough today."
Paul Braithwaite, general secretary of the Equitable Members' Action Group, said the society's 1m policyholders had similarly relied on "grossly misleading" assurances from the FSA. He said the Government's handling of Northern Rock showed "breathtaking hypocrisy. Here we have a business model that was highly questionable and the Government is underwriting 100pc of it. Yet we have been fighting for six years over a situation where the Government was asleep at the wheel over regulation".
Chris Grayling, the shadow pensions spokesman, said the Northern Rock bail-out highlighted the Government's double-standards over the 125,000 pensioners. "Until this case is sorted out, it will be a running sore on the pensions industry," he said.
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Labour's act of pensions spite fails thousands
Jeff Prestridge, Mail on Sunday 22 July 2007
The Government's decision last week to kill off proposals that would finally provide fair compensation to 125,000 victims of failed pension schemes was the action of a spiteful administration out of touch with voters and workers.
It represented a massive kick in the teeth - or 'two fingers' according to Tory Works and Pensions spokesman Tony Grayling - for workers who hoped their plight would be brought to a swift end as a result of proposed amendments to the Pensions Bill. These would have provided fair compensation for victims of failed pension schemes, irrespective of when their fund was put into windup after a company collapse. Currently, only those whose pension schemes have failed since 2005 are treated fairly.
Unfortunately, common sense and justice did not win out. The Government managed to get amendments to the Bill voted down and used a rare parliamentary procedure that in effect kills them.
The amendments represented a spending commitment and were not in order, the Government ruled. The House of Lords, which is in broad support of the proposals, will not be able to bounce back amendments to the Commons.
These despicable Government shenanigans mean that 125,000 victims of pension schemes, which failed prior to 2005, are no nearer the justice they deserve. This is despite the fact that the Parliamentary Ombudsman, the Public Administration Select Committee and the High Court have all backed their cause in the recent past. It's a travesty and something every member of this Government should be ashamed of.
How can this high-spending Government ever persuade people to save more for their retirements when it fails time and time again to right the wrong done to a group of people who did save, only for the system to let them down?
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Gordon betrays the 'people' he should help
By Patience Wheatcroft 22nd July 2007
It went virtually unnoticed, but on Wednesday evening the Big Clunking Fist slammed down and crushed the hopes of thousands. It also dealt a body blow to Parliamentary democracy, blocking any further debate on an issue crucial to the lives of many innocent people.
This is not quite the behaviour that we were led to expect from our new Prime Minister. Only a couple of months ago, as he announced the poorly kept secret that he would be putting himself forward to succeed Tony Blair, Gordon Brown, aka the BCF, promised that he would be different, "restoring power to Parliament and rebuilding public trust in democracy".
He declared: "I want to lead a Government humble enough to know its place - where I will always strive to be - and that is on people's side."
Well, after Wednesday's move there are at least 125,000 people and their families and friends who do not believe that Mr Brown is on their side, nor that his Government has shown itself to be in the least humble. Mr Brown is far too aware of his own talents to be naturally humble and, to his credit, would never be truly convincing in Uriah Heep mode.
In fact, though, it was real bully boy tactics rather than humility which were in evidence as the Government determined that it would countenance no more debate on the matter of the suggested launch of a lifeboat to rescue people who lost their pensions when the companies behind them collapsed.
The House of Lords has been determinedly championing this cause and, despite Government objections, had been preparing once more to amend the Pensions Bill currently wending a tortuous course through Parliament and send it back to the Commons, where there are some brave supporters of the scheme.
But the lifeboat was decisively sunk by the Government citing Parliamentary privilege to kill off the Lords amendments. It resorted to an arcane Parliamentary procedure to rule that, because the amendments entailed a spending commitment, they were not in order and therefore would not be debated.
This was not a principled position. It was simply that the Government has found itself increasingly, and rightly, embarrassed on the matter of these lost pensions and decided that it would put up with it no longer.
As the Conservative's Work and Pensions spokesman, Chris Grayling, put it: "This is a blatant attempt to gerrymander the Parliamentary process. The issue was becoming too politically embarrassing for them so they shut it down."
Ironically, had Mr Brown really wanted to show himself "on people's side", the pensions lifeboat offered him the perfect opportunity. He could have left the embarrassment that has been generated by the issue with the former administration and shown himself a sympathetic character.
He could have rushed to the aid of those whose lives have been thrown into turmoil because of their lost pensions and appeared as someone who respected and listened to Parliament rather than bullied it into submission.
The financial cost would have been minimal compared with the fortunes that the Government currently fritters away on less worthy causes. And the Government does have a duty to look after these people.
As this column has reminded readers before, the Parliamentary Ombudsman ruled that the Government had misled those who invested in corporate pensions only to see them vanish when the employers folded.
Unprecedentedly, the Government brushed aside that verdict, as it did the subsequent findings of the Select Committee and the High Court. The victims have had to resort to the Court of Appeal, where they will be next week in their hunt for compensation.
If a mean-spirited, as well as tight-fisted, Treasury had been behind those previous refusals to behave honourably, that was the then Gordon Brown. Now we are supposed to see him in a new and different light, the honourable, caring, paternal Prime Minister.
This would have been an ideal way for him to show that he meant what he said in that flowery May speech. He has done just the opposite.
He would argue that the Government is doing its best to find a way to help these pension victims and last week the pensions minister, Mike O'Brien, indicated that perhaps there would be more than the low-pegged Financial Assistance Scheme currently promised. But the point is that these people need help now. Already several victims have died and others are said to be suicidal. The lifeboat could have quickly lifted them to safety.
That it is has been scuttled is sad, but even more perturbing is the manner in which this was done. Perhaps Tony Blair meant to be encouraging when he described his Chancellor, and long time adversary, as a BCF but few would take the description to be flattering. And if that BCF is to be used to bludgeon dissenters into line, there is reason to be fearful.
If debate over pensions is to be denied, then what chance is there, for instance, of a referendum on an EU Constitution?
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Financial Times 13th July 2007
MPs urge pension revolt
Labour MPs should force the government to provide more generous compensation for people who lost retirement benefits when their company went bust, a Commons committee urged on Friday.
The public administration committee took the unusual step of warning MPs to resist government pressure to overturn an amendment to the pensions bill that would ensure that up to 125,000 victims received higher payouts.
The bill is due to return to the Commons next week in the first test of Gordon Brown’s political authority since becoming prime minister last month.
The vote is the latest in a long battle to win compensation for tens of thousands of people who lost all or part of their pensions pot because their scheme was under-funded when their employer became insolvent.
The Lords last month voted to change the bill so victims receive the same level of compensation promised to future victims under the government’s lifeboat scheme, the Pension Protection Fund. Peers also voted to ensure that employees of pension schemes wound up by still solvent companies received help.
The committee suggested Labour backbenchers should join forces with the Conservatives and the Liberal Democrats to defeat the government, even if ministers promised more money.
The committee warned MPs to consider any government assurances “extremely carefully” before scrapping the Lords amendment.
It is rare for a select committee to suggest MPs should rebel against the government.
Ministers have repeatedly argued that compensation paid out of tax revenues would be unaffordable. But under pressure from their own supporters, they have increased their offer of financial assistance three times.
Mr Brown hinted on Wednesday that the government could come back with yet more help “very soon”. A review is under way into whether unclaimed pension assets could finance a bigger compensation deal.
The changes to the bill would bring the level of payouts from the so-called financial assistance scheme, set up to compensate people who lost out when their pension schemes collapsed between 1997 and 2003, up to those from the more recent Pension Protection Fund.
The PPF pays out 90 per cent of core benefits, capped at £26,000 a year, with some inflation proofing. The financial assistance scheme, expanded in the Budget to cover all 125,000 victims at a cost of £8bn (net present value), offers 80 per cent of core benefits and no inflation proofing.
Tony Wright, Labour chairman, attacked the government for blaming rogue employers for the losses. He pointed out that, prior to 2003, it was legal to wind up an under-funded scheme.
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All the media reported favourably on the Lords’ decision. The following, from Channel 4, is typical:
Government Suffers Pensions Defeat
The Government has suffered a major defeat in the House of Lords, which backed a move to set up a "Lifeboat Fund" to help the 125,000 workers who lost their final salary pensions when their companies went bust.
A joint Tory-Liberal Democrat amendment was carried by 181 votes to 126, a majority of 55, during the Pensions Bill committee stage.
But within minutes of the vote, Pensions Minister James Purnell served notice that the Government would try to overturn this setback while the Tories warned that this issue would become the first major test of Gordon Brown's premiership.
Mr Purnell said outside the House: "It is irresponsible of the Tories to pre-empt the review which has not yet established if more money can be found on top of the estimated £8 billion committed by the Labour Government.
"It is completely wrong of David Cameron to exploit this issue. He is making false promises to pension victims before anyone knows if extra money can be released on top of the commitment from taxpayers.
"The Tories were never prepared to commit any additional money to the Financial Assistance Scheme before Labour pledged to greatly increase the help on offer to those who lost out."
Earlier in the Commons, the Prime Minister himself attacked the Tory-Lib Dem proposal, saying it would be "irresponsible" to promise financial support of 100% without knowing where the money would come from.
However, shadow work and pensions secretary Philip Hammond said afterwards: "The pressure is now firmly back on the Chancellor. This will be the first major test of Gordon Brown's premiership.
"Does the man who is raiding £5 billion a year from pension funds have the decency to back this proposal to help those whose pensions he has decimated?
"Trust in the pensions system cannot be restored until a just and equitable solution is found for the 125,000 victims of pension scheme failure."
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There was also a very supportive article by Liam Halligan in the Sunday Telegraph just before the Lords’ vote
Brown as 'softie' belied by ruthless alter ego
By Liam Halligan, Economics Editor, Sunday Telegraph
Gordon Brown has lately been "softening" his image. The Chancellor has had his teeth whitened - a good job, given his near-permanent rictus grin. Our soon-to-be prime minister has learnt to comb his hair and polish his shoes - or, at least, someone is polishing them for him. He's been buffing up his "celebrity" credentials too. At the recent Hay-on-Wye literary festival, he gave a rare interview to Mariella Frostrup, the gravel-voiced TV presenter and well-known "friend of the stars".
So what? Well, in the real world it's often instructive for the rest of us to compare the image politicians want to convey with their actions away from the cameras. I was reminded of that last week when a confidential court document landed on my desk which has never before seen public light of day.
The contents were complex but what I read shocked me - and, in my view, spoke volumes about the true character of the man who next month takes over at Number 10.
The document relates to the 125,000 workers being forced to rely on the so-called Financial Assistance Scheme, or FAS, for their security in retirement. These unfortunate souls have lost part or all of their final-salary pension rights - despite many having paid into their schemes for decades.
In recent years, hundreds of schemes have closed, leaving members yet to retire in a worrying state of limbo. The reasons are varied, including rising life expectancies, volatile stock markets and Brown's £5bn-a-year pension stealth tax.
All this has come as a shock. The public always assumed final-salary schemes were safe. After all, the Government regularly published leaflets stating that, whatever happened to our employers, such pensions were "guaranteed".
Workers caught up in this ghastly process have formed a protest movement. Their plight has caught the media's eye, putting ministers under serious pressure. So, in 2005 the Government launched the Pension Protection Fund - funded by industry levies and designed to pay 90 per cent of workers' pensions if their schemes went bust.
Crucially, though, those who lost pension rights before that date - the 125,000 - are "covered" instead by the -Government-funded FAS. And this has turned out to be a disgraceful example of bureaucratic meanness and torpor.
Three years after it was set up, the FAS has paid out only £4m, despite costing £10m to run. Some 10,000 "pension-theft" victims are already past their scheme pension age, yet only 1,000 have received FAS money. In many cases the amount has been negligible - one-off payments of a few hundred pounds. And remember, these are people who, after years of contributions, expected "guaranteed" pensions worth £10,000, £20,000 or more every single year.
So how does the legal document affect this long-running saga? Well, neglectful ministers and hapless civil servants - all of whom will one day retire on generous public sector pensions - have failed to administer the FAS. It still isn't paying out in any meaningful way. Dozens of pensioners have died waiting for FAS money. Several have committed suicide, tormented by the indignity of losing their pension.
Eventually, Ann Abraham, the Parliamentary Ombudsman, resolved to investigate. And that's where the document fits in. Last year, after an exhaustive 16-month inquiry, Abraham judged that ministers were guilty of "maladministration". Government advice on the risks relating to final-salary schemes, she said, had been "inaccurate, incomplete, unclear and misleading".
Ministers should not only "apologise" and knock the FAS into shape, said the Ombudsman, but extra payments should be made "as tangible recognition of the outrage, distress, inconvenience and uncertainty" suffered by those who had lost pensions they were repeatedly told were secure.
The Office of the Parliamentary Ombudsman is an extremely senior body. Abraham deserves the utmost respect. Yet, within minutes of publication, ministers took the almost unprecedented step of "rejecting" her 254-page report.
The Government "rejected", too, the findings of the Commons Public Administration Select Committee, when it backed the Ombudsman and called for a response "not about defensiveness and denial".
Ministers were also unmoved when the European Court of Justice said their actions in this area had been "unlawful and inadequate". And then, in February, when a High Court Judge again upheld the Ombudsman, the Government - astonishingly - "rejected" that verdict as well.
Enter the legal document, which is the Government's explanation to the Court of Appeal why the Ombudsman was wrong.
This appeal was lodged by John Hutton, the Pensions Secretary. But in reality Brown runs the Department for Work and Pensions - and has done since 1997. It is an open secret at Westminster that Hutton is appealing only because the Chancellor forced him to.
In this appeal, the Ombudsman's judgment is dismissed as "irrational" and "peripheral". In dealing with ministers, she has "not observed the rules of natural justice". Tell that to the pension-theft victims.
Disregarding the Ombudsman's office - and her entire raison d'etre - the Government says Abraham is "no better placed to form a view. . . than the Secretary of State".
And then, incredibly, ministers claim it was "inappropriate" for her to rely on Whitehall's standard definitions of "best practice" when making her judgment. Doing so, the Government argues, "discourages departments from striving for improved standards in administration".
It is absurd that Brown is spending public money employing expensive QCs to write such nonsense. It is absurd he is challenging the Ombudsman's decision at all, let alone in a court of law.
But what is truly unforgivable is that, having launched this appeal, Brown has now ordered yet another government "review" before the FAS starts delivering proper money. Yet that money is needed now. Pension-theft victims are dying. And others, often battling ill health, are having to work beyond their promised pension age to make ends meet.
Despite causing all this misery, our new "softer" Chancellor promised in his recent Budget that the FAS victims would be helped. "Every single one of the 125,000," he told breakfast-time viewers from the GMTV sofa, "will get back at least 80 per cent of their pension."
That's not true. The FAS, on the Treasury's orders, uses a concept called "core pension". That means the -pension-theft victims, if and when their money starts arriving, get no lump sum, no indexation and minuscule widows' benefits. FAS money will also be taxed at far higher rates than payments from final-salary schemes. What's more, the FAS only pays at 65 - even though victims' scheme pension ages were often much lower.
In sum, most FAS members, if they're lucky, will get around half their "guaranteed" pension. Many will get far less. And all on the Treasury's say-so.
But it gets worse. Brown is now ordering his backbenchers to stymie attempts to end this FAS farce. Last month, in a whipped vote, Labour MPs narrowly defeated a Tory-Lib Dem amendment to the Pensions Bill which would have accelerated FAS payments.
Many Labour members, having previously helped FAS pensioners, didn't have the guts to rebel. "Why are these MPs abandoning us?" asks Andrew Parr, a steel worker who had been due to retire last year on a £15,000 annual pension, but who has lost the lot. "I don't understand their motives."
The House of Lords is now stirring. On Wednesday peers are set to defeat the Government, reinstating the Tory-Lib Dem measure. The Upper House is determined - and, if necessary, will defy the Government repeatedly, should Brown again remove the mechanism to speed up FAS payments when the Bill returns to the Commons.
So, the Chancellor's first weeks in Number 10 could be marred by a grotesque game of Parliamentary "ping-pong", as the bill bounces between the Commons and Lords. And all the while innocent people will be suffering.
Independent experts say that funding the FAS properly, remedying this shocking injustice, would cost £20m a year. That's loose change when it comes to public spending.
At the Hay Festival the Chancellor said he wanted to "rebuild faith in politics" and "strive to earn the public's trust". So why doesn't he "strive" towards the telephone this weekend, call John Hutton and tell him to accept the Lords' amendment?
Why doesn't Brown see how much distress this FAS fiasco has caused, how much disgust among decent working people - and, incidentally, how many marginal seats it will cost Labour at the next election?
Maybe he's just unaware - a man living in a political bubble. Or maybe he hasn't got the guts to admit he was wrong. Either way, this entire episode raises extremely serious questions about the man about to lead this country.
Could Brown really be making the FAS victims wait longer - with all the misery that entails - just so he can try to overturn a court ruling in a bid to prove his point? Could he really be so bloody-minded, so determined to have his way?
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Pensions protesters target the chancellor
Guardian April 10th 2007
The chancellor's record on pensions will come under further attack today as campaigners in Wales demonstrate over the failure to protect victims of collapsed occupational schemes. A giant poster depicting Gordon Brown as the man who "destroyed" the pensions of 125,000 people will be unveiled at the rally in Cardiff.
In recent weeks, the government has come under increased pressure over claims it contributed to the decline of final salary pension schemes through the scrapping of pension tax relief.
The move deprived pension schemes of around £5bn a year, adding to the "black hole" caused by regulatory pressures, stock market failure and increased longevity of scheme members.
Campaigners have also attacked ministers for refusing to accept findings of maladministration by the parliamentary ombudsman in relation to occupational pensions and failing to fully compensate victims.
Ombudsman, Ann Abraham, concluded last year that advice given by the government had been "sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading". She urged the government to compensate victims in her report, but ministers rejected the calls and said they would not use public money for compensation.
In February, four pensions victims won a landmark high court victory in which Mr Justice Bean ruled that the government had no power to totally reject the ombudsman's findings and urged ministers to reconsider compensation.
The government recently announced it would expand the Financial Assistance Scheme by £6bn to give further help to victims of pension scheme closures, but campaigners maintain it is not enough.
The poster unveiled today will depict Gordon Brown trampling on the parliamentary ombudsman's findings while crushing Labour's red rose in his hand. Petals falling to the ground will carry the names of some of the 700 pensions schemes that have failed since Labour came to power in 1997, campaigners said.
Ros Altmann, pensions campaigner and former Downing Street adviser, said: "It is now clear that Gordon Brown had no information at all on what his raid on pension tax credits would do to smaller company pension schemes, he only had information on the very largest companies.
"Yet he ignored the clear warnings of risk and cut the tax credits anyway, without bothering to wait to gather the information he needed and without making any contingency plans to cater for the possibility of pensions being undermined.
"He made no attempt to help workers who lost out as a result of his tax raid and instead focused on giving money to big business in tax cuts in order to help long-term growth."
John Benson, a former Allied Steel and Wire employee who lost his £11,000 a year pension when the firm went bust in 2002, will be taking part in today's demonstration. Mr Benson said: "We have lost our pensions through government incompetence and the man responsible is Gordon Brown. "I voted for Labour all my life, for 40 years, and I am ashamed at what they are doing. They are letting Gordon Brown do whatever he wants. "It is a total disgrace. Families have been destroyed."
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Pensions mugger Brown has been rumbled
By Jeff Randall
Telegraph 3rd April 2007
Like a two-bob mugger at a sink-estate bus-stop, Gordon Brown has been caught with his hand in the pensioner's purse. But, unlike the hoodie whose wildest dream might be a few quid to buy crack, the Chancellor doesn't deal in petty cash. No, sir. When Mr Brown goes on the rampage, he does it for proper money. The Clunking Fist lifts out billions. His victims have their retirement savings raided again and again and again.
Mr Brown is the Mr Big of Britain's pensions disaster. That doesn't mean, however, that the Chancellor hasn't learnt a trick or two from low-life criminals. He has. When nabbed, his first reaction was to deny everything. Inconvenient truths were robustly rejected. "What me? Stealing pensions? Don't be ridiculous. I wasn't there." Unfortunately for him, official papers released late on Friday, under what he must have hoped would be the cover of darkness, reveal Mr Brown's full complicity in the Great Pensions Robbery.
Caught by the administrative equivalent of a CCTV camera, Mr Brown's desperate attempt at self-exculpation led him to blame everyone but himself. "Not me, guv". The Chancellor didn't say he was bullied at school and unloved by his family, but had that been a plausible option to mitigate guilt, I'm sure he would have grabbed it.
With Mr Brown overseas, his department's minions were sent out to defend the indefensible. Their efforts at getting the boss off the hook were as risible as they were duplicitous. First, the near collapse of our final-salary occupational pension system (once the envy of the world) was all to do with "the dotcom crash". Later, Ed Balls, Mr Brown's arch gofer at the Treasury, blamed Norman Lamont. Remember him? If this is what passes for serious analysis of a pensions crisis that has destroyed long-term savings and jeopardised the future of millions of hard-working people, Mr Balls is not fit to run a Commons coffee bar, much less the nation's coffers.
Back in 1997, while Mr Brown was scheming to plunder private pensions for about £5 billion a year, he was warned in the clearest possible terms by the Inland Revenue that the proposed raid would "make a big hole in pension scheme finances", creating a shortfall of up to £75 billion. He was further alerted to the fact that many of the hardest hit would be those who could least afford a blighted pension. Either the Chancellor was too stupid to see this or he didn't care. Not even Mr Brown's worst enemies (the queue is getting longer) believe he is thick. We must infer, therefore, that the arriviste at No 11, an old-fashioned socialist in New Labour wrapping, was interested only in sucking up as much revenue as he could.
He wasn't worried about private pensions, because he hates private. Private means that those who save and look after themselves need show no obeisance to the state.
They do not have to crawl to the Chancellor for his means-tested hand-outs. They are free from his obsessive meddling in other people's lives. Therefore, they must be battered into submission by the Clunking Fist. Stalin would have approved.
Before our occupational pension funds were coshed by Mr Brown, about 90 per cent of them offered defined benefits. In other words, they were a promise to pay a fixed percentage of final salary. Once the full force of Brown's brutalisation kicked in - it took about three years before the pain started to become very obvious - a system of which we were rightly proud began to fall apart. Today, only about one in 10 corporate pensions is final salary. Pensioners have been switched into defined contributions schemes, which are generally much less generous.
It's true that the Chancellor is not solely to blame for the unravelling of our retirement schemes. In the 1980s and 1990s, many companies were so complacent about funds being in surplus that they took "pensions holidays": they simply stopped paying in. That action now looks almost criminally negligent. A sharp rise in life expectancy has also played a part. The longer that pensioners hang around, drawing from the pot, the harder it is for funds to be confident about meeting future obligations.
But all that pales alongside the Chancellor's decision to pay for his profligate spending spree on unreformed public services in part with the money of millions of pensioners. No wonder Mr Brown refused to appear on my recent documentary for ITV, Where's My Pension Gone? No wonder he fought for two years to keep secret the warnings he had received about pilfering our pensions. No wonder when there are tricky questions to be answered about the annihilation of privately-funded retirement schemes, he's never there.
Mr Brown, of course, has bigger things on his mind. His personal sat-nav is fixed on No 10.
But when he gets there, as seems likely, he will discover that in the end, once all the spin and bluster have lost their potency, a man's reputation reflects the absolute reality of what he is.
For all his intellectual pretensions, Mr Brown is a flim-flam man - and the voters now know that.
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Media Comments on the Verdict, 23rd February to 25th February 2007
The victory in the High Court had tremendous coverage in the media. BBC News, BBC News 24, ITN, Sky, GMTV all covered it, in many cases with live interviews in the studios, outside the High Court and on College Green. We also think there were reports on every local TV/radio station with affected people in the audience.
There has been very positive daily coverage in the press, notably the Telegraph, Mail, Times, Guardian, Independent, Scottish Herald, Express, Mirror, Sun, Mail on Sunday, Sunday Telegraph, Sunday Times and many more. Thanks to all the journalists who supported our case.
It would be impossible to reproduce them all, but typical examples are given below:
Labour is too morally bankrupt to pay pensioners what it owes
By Jeff Randall (Telegraph 23rd February)
Before he was spun out of Tony Blair's magic circle, Alastair Campbell, Number 10's propagandist-in-chief, often attacked the press for fomenting cynicism about politics, politicians and those who work in public life.
His self-serving message was that Britain would be a better place if only curmudgeonly journalists, especially those hostile to his master's voice, would display more credulity when dealing with Labour ministers. In opposition, of course, Campbell ridiculed Conservative front-benchers on a daily basis.
After a decade of Downing Street's lies and deception, it seems unlikely that anyone with an IQ bigger than his shoe size accepts Mr Campbell's view of life. Even the village idiot would surely have been disabused of such a notion by events in the High Court on Wednesday. In a test case that could help 125,000 people gain compensation, four victims of collapsed occupational pension schemes won a stunning victory over the nasty piece of work that Labour in office has become.
It was a triumph for decency over dissemblance. One for the good guys, who had to withstand threats that they would be hounded for every penny of costs if they lost. Handing down a verdict that ought to shame ministers into action, the judge, Mr Justice Bean, ruled that the Government had misled the public over the safety of occupational pension schemes, and was wrong to reject the findings of Ann Abraham, the parliamentary ombudsman.
In short, the Department for Work and Pensions (DWP) had been guilty of maladministration.
Referring to one government publication, the judge said it gave the clear impression that company pensions were safe, whatever happened. "I have no doubt that this is what it was designed to do. I agree with the ombudsman that it was inaccurate and misleading."
Throughout this disgraceful affair, the Government has failed miserably to explain why these unfortunate souls should be hung out to dry. What it has demonstrated, however - beyond any reasonable doubt - is its readiness to bully little folk, manipulate numbers and distort facts. Bindman & Partners, the solicitors for the pensioners, summed it up: "The Government has been caught red-handed in an act of constitutional vandalism, intended to deprive thousands of working people of justice."
Despite Mr Justice Bean's ruling, the Government is still ducking and diving, trying to dodge full compensation for those who, prior to 2005, lost their pensions after their employers had collapsed. Its advisers are delving ever deeper into microscopic small print to find a way out.
An appeal is being considered. By comparison, back-street bookies in a banana republic seem paradigms of financial integrity.
Most of those who suffered are neither legal eagles nor pensions experts. When government literature told them that putting money into a company scheme was the best option, they did so, believing, not unreasonably, that their pension pots were state-guaranteed. If a private-equity company ("casino capitalists", as the TUC has branded them) had treated pensioners in a similar manner, ministers would have demanded heads on plates long ago. The hypocrisy stinks.
Not surprisingly, many Labour supporters are becoming red-faced and angry. More than 250 MPs, about half from Labour, are backing a parliamentary motion for "an effective compensation package". So why is Mr Blair's mean machine so determined to avoid its responsibilities? Given the scale of government spending, the waste of public funds, the appalling profligacy on politically correct projects that defy parody, it can't be just the money - or can it?
The Prime Minister bangs on that any solution must be "affordable". Oh, please. This from a man who has spent billions on a war that was justified by a dodgy dossier about non-existent weapons of mass destruction. When it comes to cynicism, Mr Campbell, even the most black-hearted Fleet Street hack has much to learn from your former boss. Cheating, connivance and corruption have become indelible trademarks of the Blair regime.
The DWP suggests that full compensation for dispossessed pensioners would cost the taxpayer about £15 billion. Frightening, eh? Yes, it is meant to be. In fact, the payout would be nothing like that. Intriguingly, the Treasury refuses to reveal its estimate of the cost of full compensation. Before my documentary on pension shortfalls was broadcast by ITV last month, the DWP told the Guardian that warnings in the programme were "unnecessary scaremongering". Who are the scaremongers now?
Hargreaves Lansdown, the pension consultancy, says that the DWP's £15 billion figure is not one recognised by anybody in the pensions industry. "The true cost is likely to be nearer £3 billion to £4 billion." The net amount would be lower still, because many pensions are taxed, and some of those with restored pensions would be lifted out of means-tested benefits. Ros Altmann, a former adviser to the Treasury, reckons the peak cost to the taxpayer would be £150 million a year, diminishing steadily as claimants passed away.
Given that the Government spends more than £550 billion annually, bailing out these bereft pensioners would be little more than a rounding error on Gordon Brown's Budget, ie, less than 0.05 per cent of his total expenditure. It may sound daft, but £150 million is lost between the cracks in the Chancellor's paperwork. Fraud and error in the benefit system alone cost the taxpayer £2.6 billion last year. Cash is not the problem. There's plenty of it sloshing about.
The Government is not bust, merely morally bankrupt.
When future historians come to judge the Blair project, the slaughter in Iraq and the loss of more than 100 British soldiers - for what? - will be at the top of the debit column: an eternal liability that will crush Blair's reputation.
Further down will be the annihilation of a once coherent and fully funded corporate pensions system. Its destruction began in 1997, when Mr Brown ended tax relief on pension fund dividends, costing private schemes about £100 billion over 10 years. It was not the only contributing factor to the unravelling of our occupational pensions, but it was the biggest.
Today, about two thirds of all British companies have closed their final-salary schemes to new members, and replaced them with much less generous alternatives. Even state-owned Royal Mail threw in the towel this month.
By stark contrast, thanks to a shabby deal done by Alan Johnson when he was at the DWP, most of Britain's 5.9 million public-sector workers continue to enjoy the benefit of index-linked, final-salary schemes and a retirement age of 60. In effect, he created a system of pensions apartheid: the haves; the have-nots.
As for ministers, they have voted themselves gold-plated, diamond-encrusted, fur-lined, leather-upholstered, deluxe retirement schemes, all paid for by taxpayers who have no such benefits and face the prospect of working to 67 in order to make ends meet.
Cynical, Mr Campbell? Ask those pensioners who are still battling for justice if we in the press have been too cynical.
Cash for honours? Certainly, sir.
Cash for pensioners? On your bike
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Pensions case: analysis
Antonia Senior, Personal Finance Editor of The Times
The four people who took on the Government over its policy towards their lost pensions showed considerable courage.
They launched their legal battle after Ministers ignored calls from the Parliamentary Ombudsman to consider compensating 120,000 workers who lost their pensions when their employers went bankrupt.
The Government’s response was to send them a letter warning that they would be pursued for full legal costs if they lost the court fight. They fought on regardless.
The remarkable battle began in 2002, when an engineering firm called Allied Steel & Wire (ASW) went bust. Its employees knew that their pension was fully funded according to a Government approved solvency test. They thought their retirement prospects were safe, even if they jobs were not.
But the liquidators then broke the devastating news. Their pensions were gone. The Government’s funding test for company pensions only worked as long as employers were solvent. As soon as the employer’s cash stopped dripping into a pension, even one fully funded by the Government’s criteria, it could hold only a fraction of the assets needed to pay out its promised pensions.
After the ASW workers, there came a deluge of similar cases, as the collapse of the technology boom in shares had led to a serious depletion of all our pension fund assets.
From the start the Government has refused to compensate these workers. Bully-boy tactics were not restricted to the legal battle; at one point the Government insisted that compensating these workers would cost £15 billion, only to revise estimates down to £3.7 billion when its numbers were ridiculed.
The Parliamentary Ombudsman, whose job is to protect us against Government mistakes, found that there had been maladministration and ordered ministers to pay compensation. She was ignored.
The ombudsman's office was established in 1967. On only four occasions in 40 years has a Government refused to hold up its hands in the face of a finding against it. Two of those flouts of our democratic safeguards occurred last year. The DWP ignored the ombudsman's findings on the lost pensions, while the Ministry of Defence rejected its recommendations on compensation to some British citizens interned by the Japanese in the Second World War.
A Commons select committee waded in to the fight. The group of influential MPs called on Ministers to reconsider the Ombudsman’s report. They were ignored.
The European Court of Justice this year found that there was insufficient protection in the UK company pension system. It was ignored.
Ministers will doubtless use the cost to tax-payers as an excuse. This is a false economy. We face a pensions crisis in this country, with savings dwindling and retirements lasting ever longer. One of the major barriers to savings is a growing lack of faith in the the pensions system. Why should we divert cash now from mortgages and holidays and our children, only for our pensions to become mired in yet another scandal?
The Department for Work and Pensions response to the pensioners’ victory was to play for time. John Hutton is “considering the implications of the judgement”. If the Government has any desire to restore our lost faith in pensions, Mr Hutton must stop fighting against mounting moral and legal opposition, and pay up.
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The Government's 'do as I say' attitude to pensions must not be allowed to prevail, writes Ian Cowie (Telegraph)
The wise old lawyer narrowed his eyes and said: "Your problem with this campaign, Ian, is that it's an 'other people's money' argument, isn't it? Yes, it's sad when people lose their life savings but why should taxpayers pay up for private sector pensions which go bust?"
As this very same man saved my skin in a potentially career-ending libel case 14 years ago – along with the late, great George Carman, QC – this made me pause for thought.
I was on my way to the same courts in which we had successfully defended a £10m writ all those years ago, to follow the latest twists this week in the company pensions scandal.
My report of what happened is on this site today and here's my reason for believing that compensation should be paid.
The rule of law should apply to the Government too.
Any individual adviser or insurance company that issued leaflets assuring customers their pensions were safe before they then went on to lose the lot would have been forced to pay compensation years ago.
That is not so much a supposition as a statement of fact. Government-appointed regulators forced insurers to pay a total of £12bn compensation during the 1990s after they wrongly advised people to leave company schemes and buy personal pensions instead.
It is worth pointing out that the insurers' victims did not lose their pensions in the way that up to 125,000 members of company schemes have done during the past decade. Personal pension planholders were only likely to receive lower returns as a result of being given bad advice.
Why should there be one law for the Government and another for everybody else? In her ruling last year, the Parliamentary Ombudsman clearly felt the same rules should apply to "inaccurate and misleading" brochures issued by the state as had already been used when the insurers' bumf turned out to be wrong.
Despite that, the Government seems determined to hang on to the kind of legalistic arguments to avoid responsibility which its own regulators ruled out years ago.
For example, the Financial Services Authority and the Office of Fair Trading have consistently dismissed small print get-out clauses by insurers and banks trying to justify high charges and low returns.
That trend also explains why, I am delighted to say, Government plans to appeal this case all the way to the House of Lords look doomed to failure. The highest court in the land came down firmly in favour of common sense and natural justice when it ruled against Equitable Life in 2000.
The insurer had argued that guaranteed pension plans it sold to savers did not offer any guarantees in the sense defined in the dictionary. When this newspaper and others criticised that sophistry, the insurer told policyholders to ignore "misleading press comment". Then the Lords threw out Equitable's case and forced it to pay up.
This week High Court judge David Bean gave short shrift to the Government's "minute textual analysis" of the small print in its leaflets which, he said, "can only give comfort to those who consider it unwise to believe anything one reads in a Government publication."
Any Government less inured to public ridicule and humiliation than this one would have seen sense by now. Unfortunately, for people who believed their promises that company pensions were safe, justice delayed really is justice denied. Many who saved for a comfortable retirement now struggle in poverty and some have died waiting for justice.
Nobody would put a penny piece into long-term savings like pensions unless they could feel confident of fair treatment. This Government constantly urges people to save toward retirement but has done great damage to public confidence that saving pays – not least with Gordon Brown's disastrous imposition of a £5bn-a-year tax on pension funds.
It will do even more damage if it proceeds with plans to auto-enrol people into its latest "big idea" on pensions, the Personal Account, when its target audience – who are mostly low-paid – realise what a total rip-off this is. Compulsory saving will merely deprive them of means-tested benefits to which they would otherwise be entitled, as the experts have been pointing out for some time now.
Anyone who can count to 10 without needing to take their shoes and socks off can see the next pensions scandal coming. It has all the gut-churning inevitability of watching a car crash in slow motion.
Even so, the practical point for most readers of the financial pages is that no matter how untrustworthy and disappointing the private sector savings industry has been in the past, it will always be preferable to the alternative.
Banks and insurers are now heavily regulated, unlike a Government which is willing and able to ignore the Parliamentary Ombudsman.
When it comes to pensions and most other aspects of personal finance, put not your faith in politicians.
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Typical Media Comments on the Judicial Review
Daily Telegraph 10th February 2007
MPs who flocked to Shilpa Shetty were a disgrace – for ignoring protesting pensioners, says Ian Cowie
A tale of two women and the very different treatment they received at Westminster this week tells us a good deal about what has gone wrong with politics in general and pensions in particular. Compare and contrast, as they used to say, the way our Prime Minister and an embarrassment of MPs found time on Wednesday to break off from their labours to fawn upon Big Brother winner Shilpa Shetty when she graced them with a visit to the House of Commons. Meanwhile, at the very same time, about 200 pensioners, who have been stripped of their life savings through no fault of their own, stood outside in the cold.
What a bloody disgrace. After many years of reporting on the growing gap between MPs' mink-lined, risk-free retirement funds and the desperately uncertain future facing rising numbers of people in the private sector, perhaps I should not be so easily shocked. But I would challenge any man not to be moved to anger if he had stood in Parliament Square that wintry afternoon and heard grandmother Eunice Clarke's story. While our Prime Minister presented Miss Shetty with a signed photograph (I am not making this up) Mrs Clarke told me how she worked in the sales department for Arcolectric Switches for 17 years before it went bust, taking her pension with it.
Throughout that time, deductions were made from her modest earnings to fund not only the works scheme she has since been denied but also her entitlement to the State Earnings Related Pension Scheme (Serps). Now, because the company fund failed, she gets £18 a week less Serps than she would otherwise have received. As a result, Mrs Clarke must continue to work part-time instead of enjoying the retirement she paid for.
To add insult to injury, Mrs Clarke must also cope with the galling knowledge that the taxes she paid, and continues to pay, are being used in part to subsidise the splendid pensions enjoyed by Tony Blair and his colleagues. They may have been too busy making calf eyes at Miss Shetty to step outside and hear Mrs Clarke's story, but they are not too proud to fill their pockets with her pennies.
Who could blame the dignified grandmother when she contrasted the politicians' pensions with her own predicament? She told me: "Sooner or later, Tony Blair is going to leave, but not without a massive pension, and he is denying us the help we deserve. It really is disgusting how we are being treated."
I second that emotion. Mrs Clarke is not exceptional; she is a sign of the times. Perhaps even more so than the blameless actress Miss Shetty, victim of racist bullying on the ghastly TV show. But let's try to keep a sense of perspective here. About 125,000 people have lost their life savings because of pension funds going bust since 1997. Regular readers know full well that was when Chancellor Gordon Brown imposed £5bn a year taxes on retirement schemes, including Mrs Clarke's. I am delighted to see such facts popping up on TV now and hope that justifies some repetition. Because of the way compounding works, that means the Chancellor has pocketed much more than £50bn which would otherwise have been available to pay the pensions Mrs Clarke and all those other people had every reason to expect.
Whoa, there! You may say, stuff happens, life is often very unfair and why should taxpayers be expected to pick up the bill just because these private sector schemes failed to deliver?
That is the line to which John Hutton, Secretary of State for the Department of Work and Pensions, is clinging, as if his life depended on it. Mr Hutton does not look like he is getting much sleep these days. Nor should he. Like Mr Blair, Mr Hutton was just too busy to step outside into Parliament Square on Wednesday to see for himself the human consequences of his callous, Nouveaux Labour, laissez-faire incompetence. When I rang to check (because, to be fair, quite a few MPs did turn out to support their constituents) a spokesman told me: "He had other ministerial responsibilities to attend to."
I would quite understand his reticence if Parliament Square had been filled with a baying mob. But when Cabinet Ministers cannot summon the courage to explain their actions to a group of septuagenarians old enough to be their parents, then I think the politicians know they have plenty to be ashamed of.
Or perhaps they just don't see what all the fuss is about; they are amply insulated from the painful realities which affect most of the people they represent. While you might think the Prime Minister is worth every penny of a pension fund it would cost £5m to buy in the private sector (and even wish Mr Blair retains the liberty to enjoy this) it is difficult to imagine any sphere outside Parliament where Mr Hutton might accrue a pension pot worth £900,000.
The Government, whose catastrophic taxes played a major part in turning company scheme surpluses greater than the rest of Europe's combined a decade ago into the deficits and closures we hear about almost every week now, cannot wash its hands of all this so easily.
Don't take my word for it. Last year, the Parliamentary Ombudsman reported that Government leaflets that falsely stated company pensions were safe constituted "maladministration". Last month, the European Court of Justice ruled that Government protection of company schemes was "inadequate". And this week, as Mrs Clarke and a couple of hundred hopeful pensioners stood outside in a bitter northerly wind, the High Court began a judicial review of this outrageous scandal. Not for the first time, we must trust in the judiciary to protect the weak and powerless from arrogant politicians.
Of course there are plenty of decent, highly principled MPs who recoil from the injustice being perpetrated on Mrs Clarke and 125,000 others. We print the names of about 250 MPs from all the main political parties, and some of the smaller ones, who signed an early day motion, calling on the Government to help victims of the pensions scandal (see our list). If your MP's name is not on it, you might ask why not.
For there were quite a few of our elected representatives who clustered around Miss Shetty like a pack of schoolboys who had never met a real girl before, while Mrs Clarke and the pensioners stood outside in the cold. Let us hope our High Court judges can remind those MPs of their duty to uphold justice and teach them to treat older people with a lot more respect.
Daily Telegraph 10th February 2007
Government faces rising tide of anger on pensions
While the Ombudsman's findings continue to be ignored, 125,000 workers who lost their savings are still waiting for justice, writes Ian Cowie
More than 200 people, who were stripped of their life savings when company pensions collapsed, braved wintry weather for a good-natured protest outside Parliament this week.
MPs of all political parties joined their constituents outside the House of Commons to call on the Government to act.
But John Hutton, Secretary of State at the Department for Work and Pensions was not among them. The Labour MP for Barrow and Furness stayed inside in the warm, hanging on tight to his taxpayer-funded, risk-free retirement scheme. A spokesman told the Telegraph: "He had other ministerial responsibilities to attend to."
Eunice Clarke, pictured with her husband Alan and grandchild Archie, lost her retirement savings
Grandmother Eunice Clarke, 63, was one of the pensioners standing outside in the cold at Parliament Square. She contributed to a works scheme at Arcolectric Switches for 17 years before it went into administration, taking her retirement savings with it. Mrs Clarke was accompanied by her husband, Alan, and grandson, Archie Blake, who is two-and-a-half years old. She said: "It really is disgusting how we are being treated.
"Sooner or later, Tony Blair is going to leave but not without a massive pension and he is denying us the help we deserve.
"As well as losing my company pension, because of the way it was connected to the State scheme, I get £18 a week less State pension." Mr Hutton claims he must wait for a judicial review, which began on Wednesday, to decide what responsibility the Government has for 125,000 workers whose pension funds have gone bust since Gordon Brown imposed £5bn a year tax on them in 1997.
The Government ignored a report by the Parliamentary Ombudsman last year, which found its handling of the pensions scandal amounted to "maladministration", and it rejected the European Court of Justice ruling last month, which said its protection of works scheme members was "inadequate".
Ros Altmann, a governor of the London School of Economics and former adviser to the Treasury who has campaigned to help the company pension victims for more than five years, said: "Many of the people affected have already died and some have committed suicide but the Government refuses to admit any wrongdoing.
"MPs from all parties are outraged at the Government's attempts to be judge and jury in its own case and to pretend that it knows better than the Ombudsman what constitutes proper standards of administration.
''What is the point of the Ombudsman if Ministers can simply say they don't agree with verdicts they don't like?
"The Ombudsman reported that members of company pension schemes were led to believe their retirement income was secure and were encouraged to join or remain in these schemes by untrue government assurances of protection."
A spokesman for the Department for Work and Pensions said: "We have every sympathy for people in this situation, and understand the distress this has caused them and their families. We have respect for the Ombudsman and considered her report into this difficult issue with great care.
"However, these were not pension schemes provided by the state – they were provided by employers. The trustees that ran them were not appointed by the Government. The Government did not underwrite these schemes or cause them to fail. We do not believe it would be fair to ask the taxpayer to fully cover the costs of these schemes collapsing.
"Nor do we believe there was a causal link between people's losses and the general introductory information we issued, which contained a warning it was not a full statement of the law."
In the House of Commons on Monday, David Laws, the Liberal Democrat MP for Yeovil, said: "So far the Government have ignored the conclusions of the Ombudsman and the recommendations of the Select Committee, and they have now been criticised by the European Court of Justice.
"Can the Secretary of State give us a promise that if, in the upcoming judicial review, the courts in this country find that the Government have acted unlawfully in rejecting the recommendations and the findings of the Ombudsman, it will be time for the Government to do the decent thing and bring forward a fair compensation package for the individuals in question? Will he give us that guarantee?"
Mr Hutton replied: "Of course the Government – any Government – will follow the obligations imposed on them by the courts and the due legal process. There is no question of our doing otherwise.
"In the High Court we will argue our case very strongly with regard to the way in which we have responded to the Ombudsman’s report”
''In relation to the European Court of Justice case, it is worth reminding ourselves that the case is still continuing before the High Court in England. There is therefore an obvious limitation on what I can say about how we might respond to any subsequent ruling by the Court." Dr Altmann said: "Informed choice has been at the heart of the Government's pension reform agenda, but when it took it upon itself to inform citizens, it did not do so honestly, clearly and transparently.
"If those who did indeed take personal responsibility for their future are left high and dry after being lulled into a false sense of security by Government, then the public will be unable to trust any Government on pensions in future.
"Government said it was aware that the public needed information from a source it could trust. This is what was said at the time, but Ministers are now trying to deny all this and pretend they have done nothing wrong."
Philip Hammond, Conservative work and pensions secretary, said the Financial Assistance Scheme (FAS) set up by the Government 18 months ago has made partial payments to only 871 people out of 125,000 whose company pensions collapsed.
During that period, the FAS has run up administrative costs of £7m but paid only £3m to pensioners. It is taking more than six months to process each claim.
One of the victims, John Brooks, 67, is a constituent of Conservative leader, David Cameron. Mr Brooks, of Witney, Oxfordshire, contributed to his employer's pension scheme for 38 years before the blanket manufacturer Early's went into administration.
He had expected a pension of £120 a week but has not received a single penny.
So Mr Brooks continues to work two days a week at a bookmaker's despite undergoing chemotherapy for leukaemia.
He said this week: "We are hoping Mr Cameron can help because it is nearly four years now since Early's collapsed, taking our pensions with them, and people are really suffering.
"I was lucky to be able to get a part-time job but some people cannot do so. The administrators and trustees just don't seem to be making any progress."
More than 250 MPs have signed an early day motion calling on the Government to help victims of the company pensions scandal. They include 119 Labour MPs, 59 Liberal Democrats and 54 Tories, plus other parties.
The early day motion, tabled by Tony Wright (Lab, Cannock Chase), reads:
''This House expresses its concerns about the continued distress of all those affected by the loss of their occupational pensions on wind-up; notes the reports from both the Parliamentary Ombudsman and the Public Administration Select Committee which identify the need for the Government to put together an effective resource package; is concerned that the measures introduced so far have been slower, and provided less help, than the measures introduced for members of Robert Maxwell's MGN pension scheme in the 1990s; believes that an effective compensation package could combine both taxpayer and non-taxpayer sources of funding; and recognises that such action is essential if future trust in pensions is to be established."
The article then went on to list the 253 MPs who had signed the EDM
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Media Comments on European Court Verdict
There has been an amazingly wide range of media comments on the verdict, covering the whole range from “the unions have won” to “the unions have lost”. The two below are typical:
Hope for workers who lost pensions (Telegraph)
Workers who lost their pensions when their companies collapsed were given a glimmer of hope yesterday after a European court ruling criticised the Government's pension laws.
The European Court of Justice said that Government protection for pensioners had been "inadequate".
Its ruling leaves the way open for billions of pounds worth of compensation claims from the estimated 125,000 people who have lost their pensions. However, the matter will now go back to the High Court in Britain, which will decide whether the workers in the case are entitled to more Government money.
The ruling follows a case brought by the trade unions Amicus and Community on behalf of workers at Allied Steel and Wire. The company went into liquidation in 2003 and 1,000 staff lost some or all of their final salary pension benefits. Former staff received 20 per cent of the benefits to which they were entitled from what was left in their pension scheme.
The Government also set up the Financial Assistance Scheme to help victims of collapsed schemes which, so far, has paid £3 million to 840 people. A new protection scheme, the Pension Protection Fund (PPF), has also been established to bail out collapsed schemes but will not help earlier victims.
In 1983, the EU introduced the Insolvency Directive, requiring member states to take measures to protect the interests of employees' pensions.
Amicus said that nothing was done to implement the directive until the establishment of the PPF in 2004. David Simpson, the union's general secretary, said yesterday that he was confident of winning at the High Court.
"Our arguments will be upheld and our members who, through no fault of their own, lost all or substantial parts of their pensions, will be fully reimbursed," he said.
However, lawyers and campaigners said yesterday that the European Court's judgement had set a very difficult test that has to be passed for compensation to be awarded.
According to the judgement, the Government must be proved to have shown "manifest and serious disregard" before compensation will be paid.
Ros Altmann, a pensions expert and campaigner, said that she did not expect the High Court to find that the Government had shown "manifest and serious disregard" and that the judgement had directed lawyers not to find this. "It has said why that does not apply in this case," she said. However, she added that the ruling did raise the possibility that the Government might use unclaimed assets to compensate those who lost pensions before the PPF was set up. "It should embarrass the Government. The judgement has established that the Government has broken EU law," she said. "However, the Government has proved singularly unembarrassable on this issue so far."
The European Court ruled against the Government earlier in its deliberations, while the Parliamentary Ombudsman said in March that information in Government leaflets wrongly informed workers they would receive the full value of their pension rights if their scheme was wound up.
Two people had committed suicide after losing their pensions said the Ombudsman, Ann Abraham. The Government was not bound by her report and did nothing about it. Donald Duval, pensions expert at consultant Aon, said yesterday that the European judgement would "strengthen the political pressure" on the Government, and workers could receive more compensation without a favourable legal ruling.
A spokeswoman for the Department for Work and Pensions said the ruling was a "common sense" judgement which recognised that current EU laws do not require member states to ensure pensions are guaranteed in full.
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Workers lose EU pensions ruling (Daily Mail)
Workers who lost out when their final salary pension scheme collapsed have failed in their bid to get the UK government to make up the shortfall. But European judges ruled that previous UK pension rules were "inadequate" to protect redundant workers.
The verdict means defeat for 1,000 employees 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 . Thursday's European Court of Justice ruling on their case declared: "Member states are not required to finance rights to old-age benefits under supplementary pension schemes themselves in the event of the employer's insolvency."
UK rules on pension provision for redundant workers have been changed since Thursday's case was brought by trade unions on behalf of the ASW workers. But the judgment said that in any case EU insolvency rules only required that Governments "shall ensure that the necessary measures are taken".
That left scope for governments to ensure adequate pension protection by for example, obliging employers to insure themselves against pension claims or set up a "guarantee institution".
The government's role would be to set out detailed rules for the fund, rather than provide for funding by the public authorities. Liability would only fall on the Government in the ASW case if there had been a "manifest and serious disregard" of the flexibility accorded under EU law in ensuring adequate pension provision. That was a decision for the High Court to make.
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More Christmases to come without a pension pot
Antonia Senior Times 11th November 2006
The collapse of Farepak is undoubtedly traumatic for those families who saved for Christmas, and now face a bleak festive season. The Government has set up a fund, MPs are donating a day’s pay and the Chancellor is quick to offer sympathy.
This is all laudable. But it will be watched with bitterness by the 125,000 people who have lost more than one merry Christmas as they face a retirement full of bleak winters after losing their pensions. This week the Government rejected calls from the Public Administration Select Committee of MPs to pay compensation to these workers. The select committee was backing an earlier Parliamentary Ombudsman report into the lost pensions, which ministers have ignored, breaking with decades of parliamentary tradition. Where are the MPs speaking out about this abuse of democracy? Where are the MPs donating their pay to this cause? Where is Gordon Brown?
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Blair must surrender on pensions
Jeff Prestridge, Mail on Sunday 11 June 2006
Slowly but surely the pressure on the Government to pay proper compensation to those people who were misled into believing their works pensions were safe - only to lose them when their employer went out of business --is being cranked up.
It cannot be long before even this hardest hearted of Governments finally cracks and pays up. It is being assaulted on all fronts - from its own MPs, select committees, the Parliamentary Ombudsman and the judiciary.
Whichever way it turns, it cannot escape. Indeed, if it were an army division, the white flag would already have been raised.
A major strand of this assault took place last week when the Department for Work and Pensions was forced to admit that the cost of compensating these 100,000-plus workers for their lost pensions was nowhere near the £15bn figure bandied around by Labour. Instead, it was a more affordable £100m to £150m a year for the next 60 years.
The £15bn figure had been plucked from the air by Labour in the aftermath of the publication earlier this year of a no-holds-barred report from the Parliamentary Ombudsman into the Government's role in misleading workers into thinking their works pensions were rock solid when they were anything but.
The report, by Ann Abraham, confirmed that the Government was guilty and that a stationery cupboard's worth of DWP literature had perpetuated the myth that works pensions were guaranteed. Labour refused to accept her findings - a controversial enough move in its own right.
But shamefully, it then attempted to justify its decision by pointing to the astronomical cost of fully compensating those who had lost their pensions, an expense that would fall on the shoulders of taxpayers already reeling from Labour's 80 tax rises over the past nine years.
Now, as we know, courtesy of the DWP, that £15bn figure was a red herring.
Abraham, understandably, is seething over the way Labour dismissed her report. If I have correctly interpreted the signs emanating from her office over the past few days, I would not be surprised if she goes on the offensive.
At the very least, it looks as if she will write to all MPs in coming weeks reconfirming her view that the Government must now pay proper compensation rather than leak out drops of redress through the Financial Assistance Scheme - a DWP-controlled body with tight purse strings. Almost 100 MPs have signed an early-day motion calling for justice.
The sabre-rattling from Abraham, together with the DWP's undermining of Labour's cost case for not compensating properly, do not represent the full scale of the assault on Labour. Other fronts are developing.
The Public Administration Select Committee is cranking up to conduct an investigation into the issue over the coming weeks while the splendid Pensions Action Group, helped by their guru Ros Altmann, is on the point of setting in motion a judicial review of the Government's decision to reject Abraham's findings.
As if that were not enough, the Government may also be forced to apologise to Parliament for some big inaccuracies in the DWP report published last week in response to Abraham's report, namely exaggeration of the FAS's generosity. Surely, not even this arrogant, aloof Government can brazen it out for much longer.
It's time Blair stopped thinking about only his own early retirement plans and instead authorised the compensation payment that everybody else bar him, Brown and a few Labour cronies thinks should have been paid years ago.
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Pensions scandal heads for High Court, The Times 20th May 2006
By Christine Seib
THE Government last night faced the prospect of a lengthy High Court battle over its refusal to compensate 85,000 people deprived of their pension savings when their companies went bust with deficits in their final salary scheme.
The Pensions Action Group is representing workers who have sought a ground-breaking judicial review of ministers’ actions. The Department for Work and Pensions has just two weeks to supply the group with calculations justifying ministers’ claims that compensation would cost taxpayers £15 billion.
Leading human rights lawyers, who have agreed to represent the group on a no win, no fee basis, will use the information to argue that the High Court should hold a judicial review of the Government’s decision to ignore the Parliamentary Ombudsman’s recommendation for compensation.
It would be the first time that the Government’s treatment of a Parliamentary Ombudsman’s decision has been subjected to judicial review. If the High Court agrees, the review could start as early as the summer and last a year or longer.
Stephen Grosz, head of public law and human rights at Bindman & Partners, said that he believed that the Pensions Action Group had a “strongly arguable case”. “We think there has been a serious injustice done,” he said.
Mr Grosz and solicitor John Halford, also of Bindmans, will instruct counsel for Blackstone Chambers on behalf of the group. Blackstone will also work on a no win, no fee basis.
In March Ann Abraham, the Parliamentary Ombudsman, recommended that the Government compensate up to 125,000 people who lost all or part of their final salary pensions savings.
Ms Abraham claimed that the workers were misled by government assurances that final salary schemes were safe. But the Pensions Department refused to accept that it was to blame for the scandal.
It said that some of the victims were eligible for benefits from the Financial Assistance Scheme, the Government’s £20 million-a-year compensation fund, which has paid out less than £25,000 since it began two years ago.
John Hutton, the Work and Pensions Secretary, promised more than two months ago to provide evidence of the £15 billion cost but has failed to do so.
It was only the second time that the Government had rejected a Parliamentary Ombudsman’s findings. Ms Abraham is thought to be furious and is believed to have privately given her backing to the appeal for a judicial review.
Ros Altmann, an adviser to the Pensions Action Group, said: “The Ombudsman clearly explained that this is the Government’s fault but the Pensions Department refused to listen. Until it does so, it’ll undermine public confidence in pension reforms unveiled in this week’s White Paper.”
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Probably every daily paper in the country reported on the Ombudsman’s report and universally condemned the Government’s subsequent rejection. To quote them all would be repetitive, but as a typical example here is Paul Routledge in the Mirror:
BLAIR'S PENSION COP OUT
IN this country, when the umpire gives you out, you don't argue. You walk from the crease. It is not British to reject his judgment.
So what are we to make of the behaviour of a government that refuses to accept the verdict of Ann Abraham, the Parliamentary Ombudsman?
She held ministers responsible for the wrong advice given to victims of failed company pension schemes.
85,000 men and women lost all or some of their retirement income when their employer went bust.
They relied on the government to bail them out - because successive ministers had promised that their money was safe.
But when push came to pay, these workers have been sold down the river.
Pensions Secretary John Hutton sniffs patronisingly that his department had never promised anybody anything. It had merely offered "general guidance" in leaflets to anxious workers.
Sphericals. This is a copout on a grand scale, made worse by the arrogant, condescending manner of the minister responsible, who (naturally) will get a £90,000 pension from public funds.
Tony Blair compounded the offence by claiming that acceptance of the Ombudsman's recommendations to make good the pensioners' losses would land the taxpayer with an instant £15billion bill.
Bigger sphericals. He knows it would be much less, as the cost would be phased over many years. The best estimate is £100million a year, a drop in the ocean of public finances.
But there is an issue of principle here. If you go to arbitration, you accept the outcome with good grace - even if you lose. Alas, New Labour does not have any shame, and toadies to the Prime Minister do not become any more New Labour than Hutton. The Ombudsman was set up by Harold Wilson, the last genuine Labour Prime Minister of this country.
He must be revolving in his grave knowing that a Labour government could act in such a cavalier, cynical, sneering manner.
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Sunday Times 12th February 2006
Labour faces £5bn pensions payout
Robert Winnett, Whitehall Correspondent
THE government may have to pay more than £5 billion in compensation after a 15-month investigation by the parliamentary ombudsman into the plight of workers who have lost their pensions.
A report by Ann Abraham, delivered to the government last month, is understood to accuse ministers and officials of a catalogue of mistakes and of misleading the public and parliament. A Whitehall source said the report found the government "guilty of maladministration".
The Treasury and other departments are now in heated negotiations with Abraham over the size of the bill for compensation. It could be the biggest so far, exceeding the £4 billion paid out over BSE.
More than 85,000 people lost their pensions as more than 400 companies went bankrupt or closed their pension schemes. Most of the schemes involved foundered after the crash in share values in 2000.
In the past firms had to ensure that there was enough money in company pension funds. Labour changed the rules so that companies could could pay less money in but did not warn the public that savings were no longer secure.
When a scheme shuts, pensions are still paid to those who have already retired but those still working can be left with nothing, even if they have paid in thousands of pounds.
A Whitehall source who has read the ombudsman’s report said: "The evidence shows very clearly that the government should have warned people of the dangers but did not. In fact, ministers repeatedly assured people that their pensions were safe when, internally, they were being told the opposite."
The scandal centres on the minimum funding requirement (MFR), a formula for calculating how much firms must invest in final salary funds to guarantee workers’ pensions. This legally binding formula was changed twice by Labour, once in 1998 and again in 2000, ending the guarantee of a pension if the fund closed.
The ombudsman has uncovered a report commissioned by ministers in May 2000 - seen by The Sunday Times - which states: "There is a large and worrying gap between the level of security which the MFR actually delivers and the public’s perception of what it will deliver . . . it is important that members (of pension schemes) are not misled into thinking that their benefits are fully secured."
Other documents confirm that officials and ministers knew that pensions were not secure.
However, the ombudsman’s report highlights an answer given in March 2002 by Malcolm Wicks, then a minister in the Department for Work and Pensions (DWP), to a Commons question that: "Legislation is in place to ensure that the pension rights that individuals have already built up in schemes are protected." This was misleading.
The report, due to be published next month, also highlights misleading leaflets issued by at least three government departments and agencies. One, produced by the DWP in 2002 and 2003, states in a section entitled "How do I know my money is safe?" that: "You are protected by a number of laws designed to make sure schemes are run properly."
Ros Altmann, a pensions adviser who has campaigned for pension scheme victims, said yesterday: "What has happened to these people is a travesty and Labour would have campaigned vigorously for compensation when in opposition. Gordon Brown must find the money to compensate these people who have been misled by the government."
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Pensions Management February 2006, Notes from Westminster
Delay is the deadliest form of denial
The Pensions Action Group, assisted by Dr Ros Altmann, represents the 85,000 people in this country who have lost most, in some cases all, of their pension following the wind-up of their company scheme.
In November 2004 the group submitted a complaint to the Parliamentary Ombudsman asking her to investigate the production of official material which promoted final salary occupational schemes and encouraged members to join, the lack of warning about the risk to accrued pension rights (despite giving stark warnings about the risks of private pensions), the relaxation of the MFR in 1998 and 2002 which further reduced the security, and the misleading use of many words and phrases. For example, we found common, simple phrases such as Safe, Minimum, Guaranteed, Protected by Law, and Fully-funded had all taken on new meanings. As the Queen of Hearts said in Alice in Wonderland, “words mean what you want them to mean”. In this fairy tale world a scheme like ASW Sheerness can be over-funded according to the Government’s MFR standards, but still have insufficient funds to meet its liabilities. Any sensible person, but not the Government, would call such a scheme under-funded.
We were originally told that the investigation would be completed around Summer 2005. In March we were told that the report could be expected “early in July”. In July we were told that the report was almost complete but, because Parliament was in recess, it would be published in October. Nothing happened in October, then in November we received a letter saying that the expected date was now the end of this parliamentary session, in other words March 2006
The reasons given are the complexity of the investigations and the major implications for the government and the complainants. However, the complexity and the implications have been obvious from the start of the investigation. What has changed at the last minute? The more cynical amongst us suspect that the report was, indeed, ready in July but it was critical of the government and has been repeatedly delayed by new submissions. Similar delays have also been encountered by the unions taking the government to the European court. What disclosures do the government fear?
These delays merely compound the stress that members have already suffered. We were told, by former Secretary of State Andrew Smith, that the government was aware of our plight, but “did not want to raise false hopes”; a phrase which almost became a mantra. However, over the past 18 months, our hopes have been constantly raised and then dashed. After the support of the majority of backbench MPs had been marshalled in April 2004, and with the Government facing its first Parliamentary defeat, the Treasury reached a midnight deal to establish the Financial Assistance Scheme. The media, MPs and the public were told that this scheme would provide “significant” help for the victims of this scandal. Our hopes were raised, and then dashed as it became clear that the FAS was no more than a confidence trick and was totally inadequate to provide any meaningful help. The Treasury has not even set any new money aside and will not do so before 2007/8.
More than 70,000 of those affected will get nothing. Only those within three years of their scheme pension age are eligible but only for 80% of their benefit with no inflation linking, a cap of £12k (as opposed to the PPF cap of £25k), and payments will only be made from state pension age not scheme age. The FAS also excludes members of schemes in wind-up whose employers are still solvent.
• somebody age 56 can be receiving a full, indexed, protected pension through well timed early retirement, (odd how many senior managers fall in this group),
• somebody age 58 with a scheme age of 60 will qualify, but only from 65
• somebody aged 62 with a scheme age of 65 will get nothing
The FAS is, indeed, a fairy tale world. And, and to date it has only paid out to 13 members of ASW Cardiff. To the best of our knowledge it has yet to pay anything to widows of members who have died such as Bernie Wade and Dave Cheshire have died, leaving them with almost no pension. Despite recent promises of payment before Christmas for widows and people with terminal illness, it now seems certain that these promises, too, will have been broken.
We have seen so many broken promises and half truths that none of us have any faith in government statements. Given our experiences why should anyone trust the government on pensions in future? How can this nation ever restore confidence in pensions if those who played by the rules and saved all their lives are left without the pensions they were assured were safe and protected by law?
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Article in Times Saturday 19th November
Government must pay for pensions delay
by Patience Wheatcroft
ON OCTOBER 31 members of the Pensions Action Group descended on Downing Street, several of them kitted out in costumes apt for Hallowe’en. That there should have been a few ghosts among their delegation was appropriate, for while investigations have dragged on into their missing pensions, several members of the Action Group have died.
Yesterday, the members of the PAG learned that there would be several more months to wait before they hear whether they are to stand a chance of receiving compensation for the pensions that they lost when the funds were wound up without sufficient funds to meet their obligations. That means many more months of anxiety for people who thought that they had made provision for their retirement only to find that it had vanished.
Their predicament is embarrassing to a Government which is keen to encourage people to put money into pensions. It is even more embarrassing because the desperate pensioners blame the Government for their loss. That is why the Parliamentary Ombudsman has been examining their allegations of maladministration by the Department for Work and Pensions, the Treasury, the former Occupational Pensions Regulatory Authority and the Revenue and Customs. The pensioners’ contention is that these bodies did not ensure that pensions contributions were sufficiently safeguarded.
But it is taking Ms Abrahams so long to produce her report that some cynics are suggesting that the Government is anxious that this potentially embarrassing document should be delayed as long as possible.
It is over a year since the investigation was first launched. The following March, the Ombudsman’s office wrote to complainants telling them that the Report should be complete in July this year. Well, in July, the complainants did receive communication from the Ombudsman. It was a letter to tell them that, although the draft report was almost finalised and the last submission had been received from Government, publications was now estimated to be shortly after Parliament returned on October 10, 2005.
Yet by Hallowe’en, the report had not been seen and the attempt at haunting Downing Street has not brought publication any closer. Yesterday the Ombudsman informed complainants that she would not now anticipate publishing until March 2006. According to the letter, the latest delay is because the Ombudsman is conscious of the seriousness of the potential implications of the case and she needs to give all those involved opportunity to read and reflect on the report before responding. Yet that would surely have been apparent to her last July, when she expected to be publishing the report just three months later.
Ms Abrahams acknowledges in her latest letter that complainants may be “disappointed” by the delay. True, but that disappointment is nothing as to the knowledge of what 85,000 people have lost. If they were to manage to slide under the umbrella of the Government’s Financial Assistance Scheme, in its current form, they would receive only a sliver of their full entitlement. Hence they hope that the Government will be found to have been at fault and liable to provide compensation. That would be embarrassing for the Government but it would also be just.
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Kent on Sunday 11th September 2005
Trousers Off Again in Fight for Pension
By Jamie McGinnes
DESPERATE times require desperate measures. So when it came to thinking up a suitable protest at being stripped of their pensions, baring all seemed the right way to get the message across.
In just over a fortnight, members of the Kent-based Pensions Action Group will carry out their third strip on the beach at Brighton to coincide with the Labour Party Conference.
Three of the men who have already done the Full Monty are Andrew Parr, 60, Phil Healy, 61, and John Hayter, 61, who all worked for Allied Steel and Wire at Sheerness.
Three years ago they were all looking forward to cosy retirements, living off of schemes they had paid into for up to 29 years. Instead, the three engineers have been forced to stay at work - and take part in stunts which see them braving the elements with little more than a "Stripped of Our Pensions" banner for protection.
When ASW went bust in the summer of 2002, the men went home to tell their wives the good news. They could take an early retirement as their pensions were fully funded, they said.
But within a week the shattering reality emerged that the only people whose pensions were guaranteed were those who had already retired. Tragically, the three were among those within a few years of retirement but now faced losing most or all of their pensions.
And they were not alone. Eighty-five thousand people from nearly 400 schemes around the country have lost their pensions after their firms folded.
Since the collapse of ASW the action group has staged all kinds of protests, including a funeral march outside Parliament and a spoof St Valentine's Day Massacre when they dressed as gangsters and molls.
They even reported the theft of their money at New Scotland Yard.
But the beachfront demo has been their most effective - and most daunting action.
Mr Healy, from Halfway, Sheerness, said: "It was nerve-wracking, but when you realise the publicity we got and the number of people there, if somebody said drop your trousers now it wouldn't take much encouragement."
Mr Parr, from Minster, said: "I was more worried about the weather because the forecast was it was going to pour with rain."
He added: "The first time we did it we had an extremely lucky break. We were there doing our strip tease in the background of a live TV programme Andrew Neil was doing. People starting ringing in to ask what was going on and so they panned their camera away from what they were doing onto us."
Last year the men's wives donned fake breasts and wore Victorian-style bloomers to stage their own protest.
Their demos may have been in a light-hearted vein, but the men's lives were effectively put on hold by the devastating news in 2002, said Mr Hayter, from Whitstable.
"All of the things the Government said we should be doing we did. At the end of it they have taken our pensions to pay other people. It's like punishment. We have been punished for doing the right thing.
"We all make mistakes - governments make mistakes - and the hardest thing is to own up and acknowledge a mistake has been made. Until they do that nothing will be resolved."
Mr Healy said: "My wife was due to retire in March, but she's going to stay on for a few years just until our pensions fund is resolved."
The strain of being on the campaign trail resulted in Mr Parr experiencing heart failure last year. He had to be treated with a defibrillator and doctors have told him to take it easy.
This year's strip will take place on Monday, September 26.
For more information about the Pensions Action Group visit their website at www.pensionstheft.org
I’ll speak to Chancellor vows Blunkett
By Jamie McGinnes
DAVID Blunkett has agreed to talk to Chancellor Gordon Brown about the plight of workers from across the country who lost their pensions.
In a meeting in London on Wednesday, the Work and Pensions Secretary told a group which included John Hayter, from, Kent, that he wanted to "draw a line" under the episode.
But Mr Blunkett said he did not believe it was necessarily the Government's duty to reimburse the thousands who have lost entitlements through no fault of their own.
"His position was that he couldn't see why the Government should pick up all of the pieces from all these different private pensions and they have to draw a line somewhere," said Mr Hayter.
The Government unveiled the Financial Assistance Scheme earlier this year, but despite the fanfare, Mr Hayter said it would only help those within three years of their retirement date in May 2004 - about 15,000 of the 85,000 people who lost their pensions.
"The Government could resolve this tomorrow if they wanted, but I told Mr Blunkett they didn't want to because they didn't value good, hard-working, decent people in this country.
"He was very sympathetic, but we don't want his sympathy. He said he will take our case up with Mr Brown, who's been the stumbling block for us. We have been deserted by this government. It's disgraceful."
The Pensions Action Group has complained to the Parliamentary Ombudsman that government booklets when they took out their pensions said they were "safe" and "protected by law," with no mention of any risks. A report from the ombudsman is expected in October.
At the same time, the unions Amicus and Community are suing the Government in Europe. They say under Article 8 of the European Insolvency Directive, governments are supposed to protect workers pensions when a company becomes insolvent. The case is expected to start next year.
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BBC Moneybox Radio 4 Saturday 3rd September 2005
Presented by Paul Lewis
LEWIS: A government rescue plan began this week to help some of the people who’ve lost a significant part of their pension after their employer became insolvent. It’s more than 15 months since the Financial Assistance Scheme was announced, but still not a penny of the £400 million promised by the government has been paid. And it could be the end of the year before the first payments are made. That will be too late for Dave Cheshire, who paid into his pension at Dexion for more than 30 years, but before he knew what he would get from the scheme, he died in July. Earlier I spoke to his widow, Marlene, and asked what she got from the Assistance Scheme.
MARLENE: Nothing yet. I’m just living on my bit of state pension and from Dave’s national insurance stamps – a bit of money I’ve had from that, you know.
LEWIS: So how much a week is that, if I may ask?
LEWIS: So you’re living on £117 a week?
LEWIS: And has anyone told you what you’ll get or when you’ll get it?
MARLENE: No, no.
LEWIS: I suppose Dave must at least have been pleased that after all the work that you would at least get something?
MARLENE: Well when he was dying, a few hours before, a couple of hours before he died, I told him. I told him a lie. I told him we’d got the pension to let him go in peace because he was so worried about me. Because I mean in the end you just don’t believe them, you just don’t believe anybody, you know, because that’s the way it makes you. And I just told him that. I said, “No need to worry, Dave.” I said, “You never guess what, we’ve got the pension.” I just said that. And that’s what’s made me so angry because I had to lie to him to let him go in peace.
LEWIS: Marlene Cheshire. Well Ray Lane is 59. He’s too young to get any help from the Assistance Scheme despite years of paying in.
LANE: Well I joined the final salary pension scheme in 1974, which was part of my conditions of contract. And everyone said at that time, including the government, that this was a safe and guaranteed way of providing a pension on retirement.
LEWIS: If the worst comes to the worst and you get nothing or very little, how will that affect your retirement and your plans for the future?
LANE: Well there won’t be any. I mean I’m going to have to carry on working because it’s got so few years left, I don’t think I’d be able to recuperate the money I’ve lost in the pension. So you can see yourself, keep on working just to live really.
LEWIS: What would your message to the government be?
LANE: Do right by us and pay us what we’re entitled
to. We’re not asking for anything which we’re not. I’ve paid in all these years and done what they said after all these years and it hasn’t come to fruition.
LEWIS: Ros Altmann is an independent pensions policy adviser. I asked her why the scheme wasn’t working for so many.
ALTMANN: The problem is that the government has set aside a sum of money which is nowhere near enough to address the problem and then it’s trying to devise a scheme that fits the money instead of does what’s necessary.
LEWIS: So who is not going to be helped?
ALTMANN: Most people who are affected are not going to be helped. Only 17%, less than one in five of the people who’ve lost their pensions, are going to get any help at all from this whole scheme. The rules are quite clear. Anyone who was within three years of scheme pension age will be entitled to receive 80% of the pension they were expecting from the Financial Assistance Scheme, but they won’t get a penny until they are at state pension age. So even if their scheme pension age was 60, they won’t get anything from the Financial Assistance Scheme until they’re 65. And remember, Paul, that none of the benefits that are being paid will be inflation linked at all and there is a cap of £12,000 a year. So after about 10 or 20 years of receiving this, the 80% will be worth more like 50%. And for some people who were having you know pensions of around £20,000 a year, they’re already losing a huge portion of their pension even under the Financial Assistance Scheme.
LEWIS: And what about the people who are younger than that? Have they any hope of getting money in the future?
ALTMANN: The Financial Assistance Scheme offers them absolutely nothing, so all of this effort and the whole arrangements that are being put in place are only for this tiny group of people, less than one in five of those who were affected. No one else gets a look in. Therefore we need more money and to do this properly rather than trying to do a half-baked system which is further compounding the injustice.
LEWIS: Ros Altmann. The Minister for Pensions Reform is Stephen Timms and I put Ros Altmann’s first point straight to him. Isn’t the truth that the money you’ve set aside isn’t enough, it’s nowhere near enough to deal with these people? You’ve just tailored the scheme to fit the money rather than the need that’s there.
TIMMS: Well the money will certainly be very, very helpful for people whose position is the most difficult. It will top them up to about 80% of the core pension benefit that they were expecting subject to a cap of £12,000 a year. Now obviously for a lot of those people, that’s extremely helpful. It is not however by any means what everybody would have liked and we’ve never claimed that it was.
LEWIS: How many will actually get money from the scheme though because it won’t be all the people in those schemes?
TIMMS: No, it certainly won’t. It’s those within 3 years of their scheme’s normal retirement age or above that age on 14th May 2004. We estimate that’s going to be something like 15,000 people, so it is a lot of people but by no means all the members of those schemes.
LEWIS: But what do you say to people like Ray Lane who we heard from? He’s 59 now. He was expecting to retire at 62. He’s just outside that cut off date you mentioned. He’s not going to be able to save up for much of a pension, is he?
LEWIS: He’ll get nothing.
TIMMS: Certainly the scheme won’t be helping Ray, that’s true. I mean I would make the point that we’ve always said we will review it after 3 years, so we’ll announce the decisions about its future in a couple of years time, in summer 2007. But the scheme as it’s currently constituted, it’s absolutely right, won’t help Ray.
LEWIS: But the point he’s made is that the government said these schemes were safe and until 1988 people had to join them, so surely the government does have a responsibility to honour that advice that these schemes were safe?
TIMMS: No, I don’t think that is right. I mean clearly when the employer standing behind a scheme goes into insolvency, it’s always been the case that the employer is therefore no longer there to honour this guarantee. Certainly I’m not aware of any suggestion that the government was guaranteeing.
LEWIS: But a booklet from your department in 2003 said… The question was ‘how do I know my money is safe?’ The booklet said ‘you are protected by a number of laws.’ It didn’t say anywhere that it might not be safe.
TIMMS: Well that’s true …
LEWIS: And the Financial Services Authority, if I can just go on, said ‘you are guaranteed a certain level of pension when you retire’. That’s in a guide in 2001 – you were guaranteed. So that’s two parts of government that did say they were safe and guaranteed.
TIMMS: But the guarantor is the employer and if the employer becomes insolvent, clearly there isn’t anyone there to guarantee it.
LEWIS: So you’re saying that from your point of view, you don’t believe the government has an obligation to pay these pensions? You don’t believe the government told people they were safe?
TIMMS: No. We have wanted though to get help to those whose position we felt was the most difficult.
LEWIS: Stephen Timms. And the ruling on this issue of the government’s responsibility will be given by the Parliamentary Ombudsman, probably in the next few weeks.
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From Scotland on Sunday 31st July 2005
(There are a few journalistic errors in this article. It states the FAS will help everyone, whereas at present it will only help the 15,000 or so people who are within three years of their retirement date. It also does not mention the lack of indexing in the FAS and PPF)
I just want to get what’s due from my pension fund
By Lindsey Rogerson
Willie Riggans doesn’t want the earth- just the pension he has spent his working life paying for. But he is one of 80,000 people in the UK facing the prospect of a bleaker retirement after their companies’ final salary pension scheme went under.
After four years of campaigning Riggans has secured a payout equivalent to 80% of what his pension would have provided but his £32,000 lump sum is lost. He said “I’m looking to get back what I paid in. There are lots of people who were expecting the lump sum to pay off their mortgages who are now worried they will lose their homes”
After almost 30 years of conscientious saving into what he was told was a guaranteed pension fund, he is fighting on
Riggans, 63, said “They told us there was a huge shortfall and the scheme would have to go into wind-up. Shock set in and disbelief that after years of saving we would get nothing.”
The Pensions Protection Fund which will guarantee 90% of the pensions for employees whose final salary schemes fail in the future, came to late for the workforce of Ayrshire based united Engineering Forgings (UEF) Riggan’s employer.
They must depend on the Financial Assistance Scheme set up by the government. It has £400m drip fed as £20m a year to meet 80% of the pension rights of the 80,000 workers in Riggan’s situation. In May he had a meeting with Work & Pensions Secretary David Blunkett. Blunkett asked for time to consider what happened to all the wound up schemes and Riggans said the minister sounded encouraging
Alternatively the European Court could rule that the government should pick up the tab for the failed schemes as it has with similar claims in Spain and Italy, and the Parliamentary Ombudsman could find in favour of the employees.
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The news that the government has delayed the publication of the Parliamentary Ombudsman’s report until the House re-assembles on October 10th has been greeted with disbelief from the media. Highly critical articles have appeared in the Independent, the Guardian, the Times, the Telegraph, the Mail, the Daily Express and, below, the Sunday Telegraph. This article was the lead story in their Money section.
Sunday Telegraph 17th July
Government begs time on report to save its blushes
By Pamela Atherton
Publication of a report by the Parliamentary Ombudsman, which is understood to be critical of the Government's role in the demise of final salary pension schemes, has been delayed until the autumn.
The report, which was due to be published last week, is thought to back demands that the Government should pay substantial compensation to cover employees' lost pensions.
Iain Ogilvie, the deputy Parliamentary Ombudsman, said publication had been postponed because the Government wanted more time to submit "some further evidence''.
In an e-mail to a pension scheme member, Ogilvie wrote: "We cannot publish our report when Parliament is not sitting, so it will not be published until Parliament's return in October.''
Parliament rises on July 21. Since last November the ombudsman has been investigating alleged maladministration by the Treasury, the Inland Revenue, the Department for Work and Pensions and the former Occupational Pensions Regulatory Authority (OPRA) in the collapse of many final salary schemes.
The report is examining the information given by these bodies to scheme members and guidance given to trustees. It is also looking at delays by the National Insurance Contributions Office in making payments to complainants who lost their company pensions.
Paul Gill, a member of a collapsed pension scheme, accused the Government of deliberately delaying publication to avoid the humiliation of being told to pay compensation.
To date, the Government has offered those who lost their pensions between 1997 and April 2005 only limited compensation via the Financial Assistance Scheme (FAS), which has a budget of £ 20m a year for 20 years.
Pensions campaigner Ros Altmann said: "It is absolutely disgraceful that the Government cannot see the injustice of what it has done. The FAS is the wrong vehicle and the Government has the wrong attitude. The Treasury seems to have decided that most of these people don't deserve help.''
There was further disappointing news for pension victims last week when Stephen Timms, the pensions minister, announced that those over 65 whose schemes have not been fully wound up, and those under 65 with terminal illnesses, will receive only 60 per cent of their core benefits from the FAS rather than 80 per cent as expected.
The difference will be paid to these members when their scheme has been wound up or when they reach 65. All FAS payouts will be subject to a £ 12,000 annual cap, with payments now expected to start in April 2006. Initially, payments were due to begin 12 months earlier.
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Article in The Independent 16 July 2005
A sad end, but pension fight continues
By James Daley
Dave Cheshire, one of the country's most resilient pension campaigners, sadly died this week, less than a year after he was diagnosed with terminal cancer.
Having been one of about 80,000 people who lost all or part of their life savings in recent years after their employers went bust, Dave spent the final months and weeks of his life fighting to ensure that he, and the other victims of this atrocious scandal, received due compensation.
If you've not heard Dave's story before, it's definitely worth reading on. It epitomises the Government's callous, cold-hearted attitude to the plight of so many of its own hardworking, honest citizens.
After being urged by his employer, Dexion, to delay his retirement three years ago, Dave was still working when the company went bust in 2003. With no pensions safety-net established at the time, the company scheme had enough money to continue paying only those who were already retired. But for those who were yet to stop working, it became clear that they would miss out on almost all of their pension.
In spite of having agreed to continue working (ironically, on the premise that it would provide him with a better pension), Dave finally retired two years ago - after working and saving for 31 years - with nothing. A year later, he was diagnosed with inoperable prostate cancer and told that he had only six months to live.
Although the Government has since established a "Financial Assistance Scheme" (FAS) to help those who have lost their pensions, the first payments from this have still not been made - and even when they finally do begin, the money put aside is woefully inadequate. Dave never lived to see a penny of the money, in spite of having retired two years ago.
Although there is some provision for surviving spouses, this is capped at only 50 per cent of their partner's pension. Dave's biggest concern in his final months was whether his wife would be compensated with an adequate pension once he was gone. Due to the discrimination against women in the current state system, she knows that she will not qualify for a full basic state pension, and still has no idea what - and when - she will receive from the FAS.
Although another Dave in the pensions world - the new Work and Pensions Secretary, David Blunkett - has been busy trying to put his stamp on the pensions debate over the past two months, he has done nothing since taking up his post to reassure the 80,000 victims of this scandal.
But given that it was the Government that told these workers their pensions were guaranteed, it is now surely its responsibility to compensate them in full.
While Blunkett's predecessor, Alan Johnson, and the former pensions minister Malcolm Wicks, took the first steps to trying to ensure that more money is made available, there is still much further to go. Dave Cheshire is the first of many who are likely to die before they receive a penny of the money they are due.
All hopes now lie with the Parliamentary Ombudsman, Ann Abraham, who is in the final stages of compiling her own report into whether the Government should take responsibility for this scandal. With the evidence stacked firmly in the pensioners' favour, let's hope that when she finally publishes her assessment, she comes down on the Government with full force and orders that it stand by its promise that these pensions were guaranteed.
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Letter from John Hayter in Daily Telegraph 14th May 2005 in response to article the previous day (shown after the letter)
Sir - I cringe when reading comments made by David Blunkett and pension experts
They speak of strongly encouraging and compelling people to save for retirement, not having to rely on the state and its something-for-something agenda.
I am a former employee of Allied Steel and Wire. Thirty years ago, I had to join my company scheme as a condition of employment. Yes, I was compelled. Yes, I did save. Yes, I was told by the same pensions experts and the government, back then, that what I was doing was the best thing that I could do for a safe, secure and guaranteed pension. I was told by government departments that it was also protected in law.
Thirty years later, I find that I have been appallingly let down and deprived of my pension. The latest betrayal is this Government's derisory attempt to address this huge injustice for 80,000 victims such as myself. The Financial Assistance Scheme has failed to allocate sufficient funds to restore the pensions that have vanished with such dire consequences.
The Government is being investigated by the parliamentary ombudsman on our behalf for maladministration and the unions are suing for not upholding European legislation in protecting our pensions.
There are people who have died who have left widows in poverty, those who are terminally ill whose wives face the same fate and those on the threshold of retirement having to sell their homes, not knowing how they will survive the future.
So, Mr Blunkett and pension experts, before speaking all these fine words, restore the pensions of these decent, hard-working people who have already followed all of your rules and recommendations, and in doing so restore the confidence and the trust in saving for a pension.
John Hayter, Whitstable, Kent
This letter was in response to an article the previous day which started:
State 'will not dig pensioners out of poverty'
By George Jones, Political Editor Telegraph
People will have to save more for their retirement and cannot expect the state to "dig them out of poverty" in their old age, David Blunkett, the Work and Pensions Secretary, said yesterday.
In his first speech since taking over the pensions portfolio, Mr Blunkett said he was looking at a "something for something" agenda.
It would transform the welfare state from the traditional view of a "safety net" to one that "enables and supports, but ensures people and families can take responsibility and key decisions for themselves".
Earlier, interviewed on BBC radio, Mr Blunkett said he wanted to build a "lasting consensus" for the next 50 years to tackle the pensions crisis. But he emphasised it would involve individuals saving for themselves.
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Grandmother takes pension challenge to Chancellor
Independent 24 April 2005
Gordon Brown may view himself as prime minister in waiting, but the Chancellor has a formidable opponent to overcome before he can think about that battle: Patricia Sargent. The 50-year-old grandmother, from Gainsborough in Lincolnshire, is standing against Mr Brown in his Kirkcaldy and Cowdenbeath constituency. She is representing the Pensions Action Group (PAG), which is campaigning for more than 80,000 workers who have lost their pensions because their companies collapsed.
Mrs Sargent's husband, Keith, worked for Dexion, the shelving and storage maker whose collapse in 2003 left more than a thousand workers without their pensions. It was a similar story at companies including UEF, Albert Fisher, Blyth & Blyth, Motherwell Bridge, Richards, ASW, BUSM, Kalamazoo and Samuel Jones.
These workers were caught in a trap because the collapse of their companies occurred before the Pensions Act came into force this year. This legislation created the new Pensions Protection Fund (PPF), which guarantees 90 per cent of the pensions for members of insolvent schemes.
After a long and concerted campaign, which included the lobbying of Parliament and the Labour Party conference, the then work and pensions secretary, Andrew Smith, announced last year he was setting up a £400m Financial Assistance Scheme (FAS) to help workers caught out in this way.
But when details of the scheme emerged, it was less attractive than had been expected. It guaranteed only 80 per cent of the pension, and then only for workers within three years of retirement age. Keith Sargent, who is 56, was not covered. Indeed, the PAG has worked out that just 146 out of 1,005 workers who lost their pension at Dexion would benefit from the FAS, while at ASW, the steel group which collapsed in 2002, only around 5 per cent of workers would be helped.
Alan Johnson, the Work and Pensions Secretary, has said he will review the FAS. And this was backed up when Mr Brown visited Sheerness in Kent 10 days ago. There he was confronted by a former worker at the ASW factory, who told him the FAS was not sufficient to help the workers affected.
"We are aware of your situation and the FAS will be reviewed," said the Chancellor. However the pensions campaigners are not convinced that the review will come soon enough, or that the Treasury will release enough money to ensure the review has any real effect.
Mrs Sargent, who has lived and breathed this campaign for the past two years, says that standing against the Chancellor is an attempt to push the issue back up the political agenda. She was moved to make the stand after hearing of the plight of a former Dexion worker who has cancer, and who will die before he qualifies for the FAS, so his widow will end up with nothing.
"I went out on to my back lawn and said to myself: 'Somebody has to get it back for these people,' " said Mrs Sargent.
She had not considered standing against Mr Johnson, even though his Hull constituency is quite near to where she lives. "It is my understanding that it is the Treasury that has not been prepared to put any more money into helping us," she said.
Mrs Sargent travelled up to Kirkcaldy and Cowdenbeath last weekend to put her case to local residents and win enough support to be nominated. She was pleased with the response. "Some of the people said: 'What will you do if you get elected?', and I said 'I would be proud to be a representative for you and I would be proud to find out and understand your problems,' " she explained.
Mrs Sargent, who works as a company secretary, says she has never been involved in any form of politics prior to the pensions campaign. She would not reveal whether she had voted for Labour, but admitted: "If Gordon Brown were true to what he says, it would be very like my personal politics."
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The Actuary May 2005
Playing political football
Ronnie Sloan asks if the Financial Assistance Scheme has been kicked into the long grass
With the General Election looming, it is high time that our politicians – on both sides of The House – stopped treating the Financial Assistance Scheme (FAS) as a political football.
As readers will know from Ros Altmann’s article in the August 2004 issue of The Actuary, the FAS was announced in great haste last Spring primarily to avert a back-bench revolt by Labour MPs on an entirely different topic. After much debate, the enabling clauses are now enshrined in legislation, but the basic fact remains that the £400m so far promised by the Government (£20m a year for 20 years) is nowhere near enough to provide adequate compensation to all the 85,000 or so scheme members who have been so cruelly deprived of their pensions.
At the further Pensions Summit held at Westminster on 21 March, Ros Altmann presented strong arguments to MPs as to why the members affected should get compensation, and not just assistance. As we now know, the yearly hand-out of £20m has already been spent on supporting (partially) only the first 15,000 members who are within 3 years of age 65. The fate of all the other 70,000 members therefore remains unknown and will depend entirely on the “review” in 2008 promised by Pensions Minister, Malcolm Wicks or, even more disingenuously, on support being forthcoming from the “pensions industry”!
This is a particularly cruel way of handling this human problem, which really merits a proper basis of compensation, perhaps adopting the benefit scale set for the new Pension Protection Fund (PPF). Rough estimates indicate that the cost of PPF-scale compensation would be about £3bn, which could reasonably be spread at £75m a year for 40 years. In case the comparison is not obvious, £75m a year represents only 1.5% (sic) of the £5,000m (£5bn) of tax being taken out of pension funds each year since 1997 following Labour’s change to ACT.
This fact has been well recognised by a number of Labour MPs, in particular Sandra Osborne, MP for Ayr, location of UEF, one of the collapsed pension schemes. She therefore tabled a comprehensive Early Day Motion (EDM 40) – see box – on 23 November 2004, which called for the Government “to rectify this injustice and restore confidence in pensions” and moreover to do so “as soon as possible and in advance of a General Election.”
Now, given the degree of supportive rhetoric from the other political parties, one might have expected this issue to transcend party politics. Not so, however, as the Conservatives response was instead to table their own EDM 199, a mere 2 days later, making a similar plea, but asking the Government “to consider using unclaimed assets to boost the funds available”. Yet, this seemingly trivial distinction has caused the whole process to stall, as will be seen from the evidently partisan support for each party’s own EDM (see table). The LibDems have been constant supporters of compensation, while Labour back-benchers can hardly be blamed, with the real culprits being the Conservatives.
When I publicly challenged Tory spokesman, Nigel Waterson MP, on this at the March Summit, he replied that they had intended to get their EDM tabled ahead of the Labour one! - which looks all too much like the proverbial political football. Yet one might have thought that Tory support for a Labour back-bench revolt could even have given the Tories political advantage, through backing a socially worthwhile proposal on an important national issue being fudged by the Labour Government.
Another issue referred to in the August 2004 article was the case then being assembled for consideration by the Parliamentary Ombudsman. This complaint of maladministration against four public bodies (the DWP, OPRA, NICO and the Treasury) is now progressing well, so much so that the PO Investigation Manager announced on 21 March that they expected to complete the investigation prior to the Parliamentary recess, probably in early July 2005.
It is important to appreciate that the Parliamentary Ombudsman’s general approach to redress is “to put people back into the position they would have been in had any maladministration not occurred and, where appropriate, to recommend additional compensation to recognise the distress or inconvenience caused.” So, if the Parliamentary Ombudsman finds in favour of the complaint lodged by Ros Altmann on behalf of the Pensions Action Group, the cost of any such full compensation could significantly exceed the PPF-scale compensation referred to earlier.
The Government would also do well to remember that the Pensions Commission is still to issue its final report, in which restoring public confidence in pensions will be a priority. Furthermore, the prospect of the potentially much higher cost (than FAS) and political backlash of an adverse ruling by the Parliamentary Ombudsman will probably not be lost on a Labour Government anxious to achieve a third term in office. It may therefore not be entirely wishful thinking on my part to surmise that the Government may yet decide to play an astute political card by announcing, just before the General Election, the award of PPF-scale compensation under the FAS.
Not only would this rectify a major social injustice, and help to restore public confidence in pensions, but it might even win over my vote!
Ronnie Sloan is an independent actuary who has been helping Ros Altmann and the Pensions Action Group in their quest for compensation
EDM 40 & EDM 199 details:
EDM 40 : FINANCIAL ASSISTANCE SCHEME
Sandra Osborne (Labour) 23 November 2004
That this House recognises the suffering of those members of final salary pension schemes who have lost their pensions when their schemes were in wind-up and their need for urgent assistance; welcomes the provision of £400 million for the Financial Assistance Scheme but is concerned that this is not a sufficient sum to provide the substantial assistance promised by the Government, asks the Government to consider pooling the assets of winding-up schemes, rather than purchasing annuities, and paying pensions on an ongoing basis, as will be the case with the Pension Protection Fund, so that costs to the Exchequer can be spread over a long period of time which would provide an affordable option without overburdening the public funds; notes that if the Financial Assistance Scheme lasts 20 years those people currently in their fifties will only be in their seventies when the Scheme runs out; further notes that estimates suggest that if the Government will commit to pay a sum of £75 million a year, index linked, for 40 years into a central fund and pool all the assets of the schemes which have not yet bought annuities, promised pensions to non-retired members could be paid to at least the level of the Pension Protection Fund; calls on the Government to acknowledge that further resources will be required to fulfil the Government’s desire to rectify this injustice and restore confidence in pensions; and finally urges the Government to settle this matter as soon as possible and in advance of a general election.
Total 158 Signatures: Labour 89, LibDem 40, Conservative 13, Others 16.
EDM 199 : FINANCIAL ASSISTANCE SCHEME
David Willetts (Conservative) 25 November 2004
That this House welcomes the creation of the Financial Assistance Scheme; notes with concern that people who have already been affected by the wind-up of a pension scheme do not know whether they will be eligible for assistance, what level of assistance they will receive, or when assistance will commence; is very concerned that £400 million will not provide the level of assistance that many might be expecting; calls on the Government to reveal details of the scheme at the first possible opportunity; and urges the Government to consider using unclaimed assets to boost the funds available for assistance.
Total 90 Signatures: Labour 1 , LibDem 2, Conservative 85, Others 2.
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Article in Financial Adviser 6th April 2005
Dr Ros Altmann
GOVERNMENT AND FSA ‘MIS-SELLING’ OF PENSIONS -
PARLIAMENTARY OMBUDSMAN TO INVESTIGATE!
Confidence in pensions is probably at an all-time low. The UK’s marvellous retirement savings culture has been crumbling in the last few years. There are many reasons cited for this, falling stock markets, tax and regulatory changes, mis-selling scandals and Equitable Life are but a few. One scandal, however, stands out from all the others. The pension losses suffered by members of winding-up final salary pension schemes. This must surely rank as one of the greatest social injustices of our time.
These tens of thousands of people were encouraged – by Government – to save in their company pension schemes and were told this would generate a guaranteed, safe pension. These people wanted to provide for their own future, never wanted any state handouts and did what they were told. They believed and trusted our pension system. Governments never warned them there was any risk to their pensions. Government did not require anyone else to tell them either. Even the FSA said these pensions were ‘guaranteed’, without mentioning any risk! This surely amounts to official ‘mis-selling’ of pensions. These members contributed their money, in good faith, relying on their company scheme to provide a defined level of pension when they retired. They were lulled into a false sense of security by successive Governments and the FSA, and were never warned that they could lose their entire pension, if their company scheme was wound up.
It is impossible to over-estimate the devastation caused by loss of a pension. Their lives, their health, their families have all suffered terribly. Some have died, many are ill and desperately need their pensions. They did not have extra insurance to cover critical illness or death, because their company pension scheme provided this for them. Their families and friends will not touch pensions again. Who can blame them? Confidence and trust in our pension system has been undermined.
There is even part of these lost pensions which Government called a ‘Guaranteed Minimum Pension’, which has turned out to be neither ‘guaranteed’ nor a ‘minimum’. Yet Government does not believe this has to be made good. People contracting-out of the state pension scheme, putting their National Insurance contributions into company schemes, were assured these had been ‘approved’ to provide at least this ‘guaranteed minimum’ amount of pension. And then when they do not get even this amount, Government simply says ‘hard luck - you’ll have to take less!’ Anyone in the financial services industry must be amazed at the double standards here.
Just imagine a financial adviser or a financial company promoting and encouraging people to invest in something, telling them their investment was safe with a ‘guaranteed’ return, failing to mention any risk, or the possibility that the returns may never materialise and they could lose all their money! Compensation, in full, would be required for any losses suffered. Investors would not have to fight and beg for years, to be offered some help.
Yet this is what Government has forced members of winding up schemes to do. Only after enormous media pressure and on the brink of almost certain Parliamentary defeat by backbench MP’s, did the Treasury agree to set aside £400million over 20 years, to provide a ‘Financial Assistance Scheme (FAS)’ - not compensation! They knew that properly compensating people would cost over £3billion, so the £400million is nowhere near enough.
Consequently, last November, the Parliamentary Ombudsman launched an investigation into the Government’s handling of occupational pensions. The inquiry - headed by Iain Ogilvie, (who is also in charge of the Equitable Life investigation) - is looking at claims, from MPs and affected members, against the DWP, Treasury, OPRA (Occupational Pensions Regulatory Authority) and Inland Revenue National Insurance Contributions Office (NICO).
I have been helping provide evidence which focuses on Government oversight of the Minimum Funding Requirement (MFR) – the official minimum funding standard for pension schemes, introduced by the 1995 Pensions Act - which was weakened twice since 1997. Members have also complained of carelessly-worded information provided by OPRA and the DWP, giving false assurances of safety, without any risk warnings, even after Government was alerted by the Institute of Actuaries that members mistakenly believed their pensions would be safe in all circumstances; the investigation will also consider Government’s handling of GMP reconciliations, and failure to ensure that these pensions were, in fact, ‘guaranteed’ or ‘minimum’.
The investigation should be completed by early July, acknowledging the need for urgency, given the extreme distress and hardship which those affected are suffering. If the investigation finds Government maladministration has caused injustice to scheme members, it will recommend redress to Parliament, to remedy that injustice, which could also include compensation for distress suffered.
Most recently, to their credit, Secretary of State, Alan Johnson and Pensions Minister, Malcolm Wicks, have tried to clarify the FAS, finally announcing that members, who were within 3 years of scheme pension age last May, could be entitled to 80% of ‘core’ benefits, up to a cap of £12,000 a year. This should be a major step forward. The DWP deserves credit for trying to alleviate the suffering caused by the uncertainty of pension losses, but the sad truth is that, without more money, the FAS cannot deliver what is needed. Those who have lost out are really angry at the recent announcements. Firstly, they want more than just 80% and believe the £12,000 cap is unfair. Secondly, what about those just over 3 years from pension age – many people in their 50’s and 60’s still do not know if they will be helped? But they are most upset by all the conditions and caveats which were hidden in the ‘small print’ of the announcement. They fear this could just be political manoeuvring ahead of an election. All Opposition parties have pledged to compensate properly. The victims know that, without more money – and the DWP has promised to ‘review’ the funding, but not committed more money - the FAS simply cannot work. The problems that have come to light since the announcement include:
• Nothing will be paid until a scheme finishes winding-up, which can take years;
• Even if scheme pension age is 60, no-one will get any FAS payments until they are 65 - a huge loss of pension rights
• No provision for those in ill-health , who desperately need their pensions
• Members of schemes where the employer is still solvent are excluded – even though they have no means of forcing the employer to pay up
• There will be no inflation-linking and no tax free lump sum, meaning a significant reduction in benefits
So they feel there is still not enough clarity about how much people will get or when they will get it!
The Treasury needs to release more money and accept its responsibility for proper compensation, not just ‘assistance’. If financial services organisations have to abide by such rules, so should Government.
Firstly, GMPs should be reinstated – in full - in the state scheme. It was Government who called these ‘guaranteed minimum pensions’, not employers, nor trustees, nor advisers and, if Government never mentioned that such pensions might not actually be received in full, then it must compensate. These are the rules which everyone involved in finance must live by.
In addition to this, Government should make up for loss of pensions from members’ own and their employers’ contributions. Taxpayers must compensate for inadvertent Government mistakes. The weakening of the MFR standard, without considering what was happening to bulk annuity rates and wind-up, was careless. At the very least, there should have been risk warnings to members and tougher requirements for solvent employers who were choosing to wind up their schemes and could well afford to put in more than the minimum. This is not the members’ fault.
Compensation for these people is essential, to restore their lives and also to restore some confidence in pensions and Government. The same as would be required of anyone else in financial services who ‘mis-sold’ an investment. If these people are left to fight and beg for what they were told was safe and could be relied on, who will ever trust assurances about pensions in future? The uncertainty and unfairness of their plight are unacceptable. If Government does not do this voluntarily, I hope the Parliamentary Ombudsman will force this through Parliament in the next few months and finally end the misery being suffered by these good people.
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From The Telegraph 14/02/2005
No love lost at St Valentine's Day protest
The victims of collapsed company pension schemes staged a protest in central London over the weekend, dubbed The St Valentine's Day Massacre (of our pensions by Tony Blair).
Gangsters and molls gathered in Piccadilly to highlight their claims that the Government has failed to protect 65,000 workers who have lost the majority of their pensions savings when firms – some of them profitable – wound up their deficit-laden final salary schemes.
Hundreds of members of the Pensions Action Group protested at Labour's £400m pension rescue fund, the Financial Assistance Scheme, which they claim is "no use at all" to anyone under 60.
The PAG says the £400m, to be spread over 20 years, is woefully inadequate and little more than a "shambolic con-trick". A second protest was held on Saturday morning outside the Labour Party spring conference in Gateshead.
The group has already convinced the Parliamentary Ombudsman to launch an inquiry into the Government's role in the pension scandal – in particular booklets that described occupational pensions as "protected by law".
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On 5th January 2005 Terry Faulkner, chairman of the NAPF, wrote an open letter to Alan Johnson. The letter can be found in its entirety on our documents page, but the two articles below neatly summarise its content:
Pension rescue plans 'face funding crisis'
By Tessa Thorniley
The chairman of the National Association of Pension Funds has written to Alan Johnson, Pensions Secretary, warning of "severe consequences" if the Government fails to resolve the funding dilemma facing its two new pension rescue funds.
In a scathing letter, Terry Faulkner says that the Government has failed to properly assess the budget that would be needed for the Financial Assistance Scheme.
He also says that the Pension Protection Fund will be "swamped with claims" from the start because of a last-minute change in policy.
The schemes are designed to bail out members of collapsed final-salary pension funds. The £400m FAS is for members of schemes that have already collapsed and it will be replaced by the PPF from April this year.
Mr Faulkner said the Government's decision to introduce an element of retrospection to the PPF was driven by "the patent inadequacy of the budget committed thus far to the FAS". The NAPF wants the Government to look for alternative sources of funding for the FAS.
On the PPF, to be funded by a levy on the pensions industry, Mr Faulker says: "We cannot understand how our pension fund members who provide pensions voluntarily as part of the employment package can realistically be expected to finance retrospective assistance."
He claims that the absence of a lender of last resort for the PPF means its finances are subject to "uncertainty and additional risk".
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By Patience Wheatcroft Business Editor
Terry Faulkner, the chairman of the National Association of Pension Funds, couched his letter to Alan Johnson, the relatively new Secretary of State for Work and Pensions, in relatively moderate language. He might have said that the Financial Assistance Scheme is little short of a Government Confidence trick, ill thought out and patently inadequate for its proclaimed purpose, and that the Pension Protection Fund as currently drawn, is at risk of being swamped at birth by a flood of retrospective claims. It is what he meant.
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Financial Adviser 16th December 2004
Goodbye and good riddance to 2004
Jeff Prestridge wrote a rather acerbic review of 2004 for the professional journal Financial Adviser. He started with the following blistering comments on the government’s pension policy:
Pensions have been blighted by a greedy chancellor of the Exchequer who continues to take his annual £6bn from company pensions without hesitating to consider the parlous state of most company-sponsored schemes. Although the government has come up with a £400m financial assistance scheme to help victims of company pension scheme wind-ups, everyone bar starry-eyed Labour Ministers knows that £400m is simply not enough to restore the pensions of the 65,000 victims of wind-ups. As for the Pension Protection Fund, a scheme designed to aid future victims of failed pension schemes, it is well intentioned but ill-conceived. It will simply bring about the demise of the final salary-based pension scheme in this country.
He later concluded with the following well justified words:
… But one person above all others has shone in 2004 and that is Dr Ros Altmann. Almost single-handedly, this passionate, intelligent and intense woman has battled to ensure financial justice for the 65,000 victims of pension scheme wind-ups.
Without Dr Altmann’s persuasive powers and intimate knowledge of the Houses of Parliament, there would be no £400m financial assistance scheme. There would be no investigation by the Parliamentary Ombudsman into how the government and a number of its departments misled workers into believing that a company pension promised would always result in a company pension paid. But she is not finished yet. Her mission will not be complete until those who have lost their pensions have had them restored – the £400m is only the starting point.
Dr Altmann is my personal finance person of the year. Indeed, she is my personal finance organisation of the year, my personal finance company of the year. By a mile. She puts everyone else to shame.
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Article from The Times September 13, 2004
Brown, the man who stole all our tomorrows
By William Rees-Mogg
By the early years of the next decade the majority of those who vote will be pensioners. That will be the grey vote with a vengeance. The projection comes from the House of Commons Library and is very bad news for the Labour Party, and particularly Gordon Brown. Since 1997 the pensions system of the United Kingdom, which used to be the best in the world, has been stripped down and left lying in pieces on the floor. Every party, now including the Labour Party, wants to put it together again. But demographics are moving against them and eight years of destruction cannot be repaired, perhaps ever.
Tony Blair must, of course, share the responsibility. If Gordon Brown is the captain of the Titanic, Mr Blair is the chairman of the White Star Line. He decided to buy the leadership of the Labour Party, and therefore the key to Downing Street, by promising Mr Brown monopoly control of economic and social policy; that is an abdication no modern Prime Minister has ever made. Nevertheless the main executive responsibility must fall on Mr Brown.
He took all the big decisions on pensions. He has wrecked the system of private pensions; he has wrecked the system of public pensions; he has destroyed the system of savings; he has taxed pensions by deliberate stealth; he has impoverished generations of old people, past, present and to come. Brown’s pension policy has been one of the great disasters of British financial history. He must be held responsible.
In his first Budget, in July 1997, Mr Brown “reformed” the system of advanced corporation tax; this was the first and largest of all his stealth taxes. The public did not understand what he presented as a technical adjustment of tax, which would fall on companies. Yet its effect was to increase the tax on funded private pensions and endowment systems by about £5 billion a year. Mr Brown knew that the public would not immediately recognise that he was taxing pensions. He taxed all the tomorrows of old age because he thought he could get away with it.
The sums are huge, and they have had a huge impact. Over eight years the tax will come to £40 billion. The accumulated loss of interest brings the cost up to £50 billion. Beyond that there is the effect such a tax has in lowering the valuation of the whole stock market. The present value of pension funds and assurance assets is £1,100 billion. If Gordon Brown had not imposed his tax, it would probably be about £1,300 billion.
The damage can be seen in the number of final-salary pension schemes which have had to be closed, and the number of pension funds which are now in serious deficit. It can also be seen in endowment and with-profits assurances that will provide only half their expected return, or will fail to cover mortgage repayments.
For private pensioners, Mr Brown’s stealth tax has been a disaster; it has led to the virtual winding up, often on very poor terms, of sections of the British life assurance industry, once one of the prides of the City of London.
He also changed the state pension system into a complex and largely means-tested structure. Almost everyone advised him against that, but Tony Blair did not have the guts to stop him. Brown’s system is absurdly expensive to administer and fails to reach a large number of the poorest pensioners because it is too complex and too demeaning. Millions have failed to claim. It largely removes the incentive to save.
Both the Conservatives and the Liberal Democrats have made their proposals to restore the state pension to a level which would largely eliminate the need for means-testing. Both opposition parties regard Mr Brown’s pension system as a wasteful disaster.
So, strangely enough, does the Labour Party itself. Gareth Davis, a Labour adviser, has drawn up a scheme under which the Gordon Brown structure of means-tested benefits would be wound up and replaced by a single state pension. The pension would go up from £79.60 to more than £100 a week under the Davis scheme, which is now being studied by Tony Blair. Of course, this proposal would mean another new tax. The problem with stealth taxes is that they eventually have to be paid.
Those whose pensions funds or endowment assurances have produced far less than they reasonably expected have only to read the City pages to understand what has happened. Pensioners who are getting £79.60 a week plus means-tested benefits can easily discover whose crazy plan determines what their pension will be.
Neil Kinnock made a famous speech in which he said the people should not be old under the Tories; they certainly should not try to be old under the regime of Gordon Brown. Politically his failure poses two problems.
How is the Labour Party to persuade pensioners, outside the public sector, to vote for it at the next general election? Of course, ministers have not had their pensions stealth-taxed nor have Members of Parliament, nor senior civil servants. But all private-sector pensioners ought to regard Gordon Brown as the enemy.
Can Gordon Brown and Tony Blair continue to cohabit? So long as the Chancellor was successful and delivered the goods, Mr Blair perhaps had to put up with him. But even by the next election, nearly half those who actually vote will be pensioners.
They will be divided into two groups, those who do not know what has hit them and those who know it is the Labour Party. That makes Gordon Brown a political liability as well as the neighbour from hell
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Pensions Management August 2004
Notes from Westminster by Andrew Parr
The announcement by the Government of a £400 million assistance fund is welcome news for those people who have lost most, in some cases all, of their promised pension because of scheme wind-ups. The announcement publicly acknowledges the fact that successive Governments have introduced flawed legislation, given misleading information to employees and devalued the available protection.
Mr Wicks stated on Money Box on Radio 4: ‘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.’
Most people, including many MPs, now think the problem has been solved. £400 million is, after all, a large sum of money, but it is spread over twenty years and there are of the order of 60,000 people who have suffered the loss of security in their old age. Over this group the fund will provide just £333 per person per year, roughly the price of a loaf of bread a day. We freely admit that this is a very simplistic view and we gather a review will be made after three years, but it does show that there are very real questions about the practicalities of the proposals.
Calculations by Dr Ros Altmann suggest that the scheme should run for over forty years to meet the promised pension entitlements, and the average annual expenditure over this time would be about £75 million. The annual cost would start very low, rise to a peak in about twenty years then fall away again.
With the average life expectancy now about 80 years, the twenty year scheme will only be of benefit to people currently over the age of sixty. The majority of people hit by scheme wind-ups are in their forties or fifties, have accrued many years in their scheme but now find they have insufficient time or income to make up their loss. The scheme will not help them.
The details of who will benefit are also vague. There have been suggestions that it will only apply to people who joined their scheme before 1988. There certainly seems to be exclusion of people whose scheme was wound up by a solvent employer.
If true, these exclusions are morally indefensible. Regardless of the reason for the scheme wind up or the date of joining, everyone was given the same assurances and advice by the government, and all suffered in exactly the same way. The law covering scheme wind-ups by solvent employers was changed on June 11th 2003, so the government has acknowledged the flaw in the legislation.
Andrew Smith has consistently told us that he does not want to raise false hopes. Because of the doubts about the duration and the scheme details he has done precisely that for many people.
Three actions have been started through the European Court, the most well known being brought by the ISTC and Amicus trade unions. These are still proceeding or waiting in abeyance to see the details of the assistance fund.
The Pensions Action Group, assisted by Dr Altmann, is also preparing a case for The Parliamentary Ombudsman. The evidence for this is still being collated, but the crux of the claim will be that “advice was given which was misleading or inadequate” (a phrase which occurs on the Ombudsman’s web-site).
We have found it disturbing that the government was advised of the risk to occupational pensions, but decided the public should not be informed. As a result, material was published by the FSA, DWP, OPAS and other government departments giving the impression that occupational pensions were safe, guaranteed and protected by law.
To compound the problem, the already marginal MFR was twice quietly reduced without publicity. In addition £5 billion is removed from pension funds every year by the Advanced Corporation Tax. Against this figure, the £400 million assistance fund, spread over twenty years, seems miniscule.
Many people who have lost their occupational pension will still be around in 2050. In political terms this is a very long timescale and changes of government will inevitably occur. It is therefore very important for all political parties to give guarantees for the future of the assistance fund. Without these assurances there will always be the nagging doubt that the fund may be reduced or stopped at some time in the future.
We are not looking for compensation; we are not looking for benefit. We simply want the security in our old age that we paid for and were promised.
Andrew Parr was made redundant from ASW Sheerness in December 2002, and runs the Pensions Action Group website www.pensionstheft.org
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Exchange of Letters in the Financial Times
The following first letter was sent to the FT from the Financial Services Authority, trying to justify why they called final salary pensions ‘guaranteed’ in their booklets provided as guides for the general public. The second letter is the response from Dr Ros Altmann.
From Ms. Anna Bradley. (Published on 16th May)
FSA guide has to be read in context
Sir, Your article 'Watchdog accused of misleading the public on pensions' (FT Money and Business May 8-9), describing a Financial Services Authority booklet on pensions as 'potentially misleading the public about the safety of final salary pension schemes', fails to take account of context and so misrepresents the position.
The FSA's consumer publications cover a wide range of subjects in differing levels of detail, depending on their purpose.
Our pension guides aim to provide basic level generic information about how different types of pension schemes work. Their purpose is to help consumers ask the right questions of their employers or financial advisers before making any decisions.
In this context, the word 'guaranteed' was used as a way of illustrating the difference between an occupational final salary scheme, which normally provides consumers with a specific percentage of their salary, irrespective of investment performance, and a money-purchase or personal pension where consumers are exposed to investment risk.
The publications are not a substitute for the information provided to employees by the trustees of an occupational pension scheme.
Financial Services Authority
From Dr Ros Altmann (Published on 22nd May 2004)
Sir, The FSA’s attempt to justify misleading members of final salary occupational pension schemes into believing their benefits were ‘guaranteed’ (Letters, May 16) is outrageous.
The claim that this statement was taken ‘out of context’ is worth pursuing, because if the wording of the FSA booklets is taken in context, the evidence against the regulator is even stronger! As the FSA letter rightly points out, its pension guides are there to ‘help consumers ask the right questions of their employers’. Sadly, there was a glaring omission, which led members to believe their pensions were safe, when they were not. The two particular guides, which are the worst examples of misleading the public, are entitled ‘FSA guide to the risks of opting out of your employer’s pension scheme’ and ‘FSA guide to the risks of pension transfers’. These were designed for members of occupational pension schemes who were thinking of transferring to another type of pension.
Both booklets refer to final salary pension schemes as offering ‘guaranteed pensions’ – not once, but twice each, and contrast this with the ‘uncertain’ level of pension available from personal pensions. Neither booklet alerts members to ask their employers the most important question of all - whether they are thinking of winding up the scheme. Nor do they suggest the need to consider whether their employer is likely to stay in business.
The entire tone of these FSA booklets is that members should stay in their employer final salary scheme, to take advantage of the ‘guaranteed’ benefits. Not one mentions of the huge risk to their pension if the scheme winds up. If financial firms behaved in this way, encouraging people to put money in, without warning of the risks, the FSA would require them to compensate for any losses.
Doubly damning, however, is that these booklets were sent out after the Treasury was advised by the Institute of Actuaries, in 2000, that members should be warned of the risks to their pension from employer insolvency. After consulting on this issue, the Treasury decided not to warn them and the FSA continued to tell them that their employer was offering a guaranteed pension.
How were members to have any idea that their pension was not safe? They were denied the chance of transferring their money out of their employer’s scheme, because they were not warned of the risks. Surely, the FSA owes these poor members an apology and full compensation, rather than trying to justify the incorrect information they published.
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Daily Telegraph Saturday 10th April
Labour MPs press for pension safety net
By Nina Montagu-Smith
Labour looks likely to be dealt a bloody nose by its own ranks, with close to half of all Labour MPs supporting a call to compensate workers who have lost their pensions because occupational schemes have been wound up with shortfalls.
The issue could become an embarrassment for the Government whose new Pension Bill, which rules out such compensation, is in the committee stage at the moment.
A total of 291 MPs have signed early day motion 200, including 203 Labour MPs - nearly half the Labour benches. Over 80pc of the Liberals and 25 Conservatives have backed the motion tabled by Labour MP Kevin Brennan.
The Lords are understood to be deeply unimpressed with the Pensions Bill and may well vote in favour of compensation for about 70,000 workers whose pensions have been lost. The Government has so far resisted claims to compensate them and has refused to accept responsibility for their plight.
Lord Oakeshott, Liberal Democrat spokesman in the House of Lords, said the Lords "would be failing in their duty" if they just ratified the Pensions Bill as it stands, as it lacks significant details and requires much secondary legislation to fill in the blanks.
The Bill provides for a pension protection fund to be set up to bail out the schemes of failed companies with shortfalls, but it will not provide for those who have already lost out. The Bill is also short on detail about how the scheme will be funded.
Malcolm Wicks, Pensions Minister, said it would not be fair to commit taxpayers' money to compensation but may yet be forced to act, such is the feeling in the House of Commons, according to members of the Pensions Action Group (PAG) campaigning on behalf of workers.
The Department for Work and Pensions will not discuss it, but is conducting research into the potential cost of compensation. Andrew Smith, Secretary of State, has requested copies of Government leaflets which advised people to join final salary pension schemes, after a meeting with PAG members.
The National Association of Pension Funds described pensions paid by final salary schemes as "guaranteed" and advised people to "join immediately" if they had access to one.
The Financial Services Authority issued leaflets stating that final salary pension schemes "give you a guaranteed pension". As recently as 2002, the Government stated in the pensions green paper: "Accrued rights are clearly protected under pensions legislation and this will remain the case."
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The Guardian Saturday 10th April
Compensation claims fuel pension revolt
by Rupert Jones
The government could face the prospect of an MPs' rebellion over pensions that ranks with previous revolts over issues such as tuition fees and foundation hospitals.
Ministers have insisted they will not bail out the estimated 60,000 workers who have lost some or all of their hard-earned company pension entitlement after their employers went bust. But a growing number of MPs believe the government must pay up, and it looks like we're heading for a showdown.
This week it emerged that more than 290 MPs, most of them Labour, have signed a Commons motion tabled by Cardiff West MP Kevin Brennan calling on the government to compensate workers at companies such as defunct steel firm ASW. They and employees at hundreds of other firms face poverty in retirement because of rules that mean people who have paid into final salary schemes for decades can end up receiving just a fraction of their entitlement - or nothing at all.
Last month it emerged that 150 workers at diesel engine maker Lister Petter are set to lose up to 90% of their promised company pensions, and there is growing concern about what will happen to thousands of staff at crisis-hit bus maker Mayflower, where there is a £25m deficit in the pension scheme.
The government has announced a new compensation scheme - the so-called pension protection fund - to safeguard millions of members of final salary company schemes if their employer goes under. But this will not take effect until next year and will not help those who have already suffered a loss.
A sustained and well-supported campaign has kept the issue in the news, and Mr Brennan has indicated that unless the government comes forward with its own plans to help those who have already lost out, he will table an amendment to the Pensions Bill.
Many MPs believe practical politics and fairness will force ministers to change their minds before the bill becomes law
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Pensions Management March 2004
Notes from Westminster by Andrew Parr
In July 2002 my employer, the steelmaker ASW, slid into receivership. At the time I was not particularly worried; with my accrued pension entitlement I could afford to retire. We would have a smaller pension than we expected, but we would be comfortable. The ASW Sheerness pension fund was, after all, more than fully funded, and just a few months earlier the company secretary had said publicly that the pension fund was separate from the company and, in the event of closure, our pensions were secure.
The truth came just two days later. We would not get the generous company redundancy and we would only receive about 30% of our pension entitlement. This would not be indexed. We were lucky, we were told, our colleagues at Cardiff would get less than 10% of their pensions, maybe nothing at all. Our dreams of a comfortable retirement had suddenly turned into a nightmare. Despite having contributed to an occupational pension scheme for all my working life we faced retirement in penury. The impact on our marriage and health has been enormous.
How could this happen? The 1995 Pensions Act was supposed to protect pensions. At the time, Secretary of State Peter Lilley had said the aim of the act was “to create a framework for occupational pensions that [was] secure, stable and fair, and to encourage people to make provision for their retirement”. A Minimum Funding Requirement (MFR) was established to ensure that a pension fund could meet its commitments.
The reality was different. In 1995, when annuity rates were over 10%, the MFR was probably adequate, but as annuity rates fell the MFR provided less and less protection. To compound the problem, the MFR has twice been quietly cut behind the scenes, and the statutory order means pensions in payment are fully protected at the expense of people yet to retire. If a company used early retirement to reduce staff numbers it is perfectly possible to have a 56 year old pensioner with full protected pension, whilst his retained 64 year old colleague has no pension at all.
You are therefore gambling the most important investment of your life on the well being of one company, but nobody has ever warned the public of this risk. Not your employer, or the NAPF, or the DWP or OPAS. Even an OPRA guide for trustees stated the MFR refers to the minimum amount of funds that should be in the scheme at any one time in order to meet the scheme’s liabilities if it were to be discontinued. This is patently incorrect.
There could be 40,000 people who have followed and trusted government advice. They saved for their retirement only to find they have lost most, in some cases all, of their savings. The money they invested has been used to provide pensions for other people.
Most of these people were forced to put all their eggs in one basket. Their employers were allowed to make joining the pension scheme a condition of employment. Inland Revenue rules prevented diversification. Because company schemes are contracted out, these people may have to rely on the basic state pension.
The pensions group believe that the 1995 Pensions Act was badly flawed and governments of both parties have been negligent. The new Pensions Bill provides an opportunity to right a terrible wrong and provide the promised pensions. Compensation is not really the right word; we simply want the pensions we paid for and were promised. There are precedents; retrospective payments were made to allow Mirror Group pensions to continue. It is ironic that you will get your pension if there is fraud, but not if your employer was honest.
An Early Day Motion (EDM200) has been raised by Kevin Brennan MP and Derek Wyatt MP calling for the restoration of our pensions. To date it has been signed by over half of the Labour backbenchers, every Plaid Cymru MP and almost every LibDem MP. We have considerable support.
Payment of the promised pensions will not be expensive. Both Dr Ros Altmann and Frank Field MP have made proposals which will have minimal, possibly zero, cost. It is not as if the government can simply ignore the problem; if nothing is done the majority of these people will be reliant on benefits when they retire.
Eight years ago we were told our pension schemes were the envy of Europe, now they seem to be crashing down around our ears. Public confidence needs to be restored, and payment of our promised pensions will send a much needed positive signal.
Andrew Parr was made redundant from ASW Sheerness in December 2002 and runs the website www.pensionstheft.org
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From The Telegraph 29th March 2004
Evidence mounts that Whitehall knew the risks
Official leaflets reveal catalogue of bad advice, writes Nina Montagu-Smith
Evidence that the Government is at least partly to blame for the loss of 60,000 workers' pensions after their employers went bust is mounting.
Government advice in leaflets distributed by the Financial Services Authority, the Department for Work & Pensions and the National Association of Pension Funds, shows clearly how people were led to believe their final salary pension schemes were safe.
Now tens of thousands have been left facing retirement in poverty despite doing the right thing and saving.
An early day motion (EDM 200) has been signed by 283 MPs, including well over half the Labour backbenchers, nearly all Liberal Democrat MPs and 24 Conservatives.
To date, the Government has denied all responsibility for this crisis. However, numerous leaflets circulated by government agencies described these pensions as "guaranteed" and urged employees to join them.
For example, the Financial Services Authority (the City watchdog established by Labour in 1999-2000) issued leaflets entitled "Guide to the risks of opting out of your employer's pension scheme" and "Guide to the risks of pension transfers". In the first, it stated: "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."
Although many people had already lost their pensions, the Government nevertheless stated in the Pensions Green Paper, published in December 2002: "Accrued rights are clearly protected under pensions legislation and this will remain the case."
The Pensions Service, part of the Department for Work & Pensions, produced a booklet in 2003 entitled "Occupational pensions: Your guide". Under the question "how do I know my money is safe?", it says: "You are protected by a number of laws... the Occupational Pensions Regulatory Authority can act quickly to protect your interests."
Ros Altmann, a specialist in occupational pensions and governor of the London School of Economics, said that in a consultation document about security for pension funds published by the Government in 2000, it was clear the Treasury was aware that the minimum funding requirement (MFR), which is the amount that should be in a scheme to meet its liabilities, was inadequate and that people investing in final salary schemes did not generally understand that.
The consultation document, which was published nearly two years before the collapse of Allied Steel & Wire, leaving 1,000 workers without jobs, redundancy payments or pensions, quotes from advice received from actuaries. Thus: "The MFR does not provide a guarantee that, in the event of an employer becoming insolvent, its pension scheme members' rights will be honoured in full."
Another passage reads: "The amount of reassurance the MFR can deliver is commonly misunderstood to be a good deal greater than it is."
Similarly: "The report recommends that there should be disclosure to members of, broadly, the extent to which their benefits could be secured by means of annuity purchase if the scheme were to wind up."
This disclosure did not take place.
Ms Altmann said: "I think this document is powerful evidence against the Government. The more one searches, the more evidence seems to emerge that the Treasury knew full well that people mistakenly believed they were protected by the law, and chose not to tell them.
"I just don't know what it will take to make this Government see that we have to agree to compensation. The longer the situation drags on, the worse it will end up being for both this Government and for pensions - not to mention the effect it is having on these people's lives."
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from The Times 27th March 2004
Workers given fresh hope of pension bailout by Antonia Senior
An estimated 60,000 workers who have lost their pensions were given fresh hope of government cash yesterday as it emerged that ministers have commissioned a study of the cost of compensation.
Despite repeated refusals to provide cash to bail out the workers, ministers have asked professional trustees to assess the cost of a bailout.
After a series of embarrassing demonstrations outside the Houses of Parliament and pressure from MPs, the Government appears to be reconsidering its tough stance by commissioning the study.
A planned government-sponsored insurance scheme will come too late to protect an estimated 60,000 workers who have already lost their pensions after the employers behind their schemes folded. The Pension Protection Fund, which will pay up to 90 per cent of lost pension rights, will not come into force until April 2005.
Unions are considering legal action to force the Government to compensate workers at ASW, a steelmaking firm, who have been left with less than half their promised pensions after the company went into receivership. Campaigners point out that many of the workers joined their company pension plans when legislation forced employees to sign up for retirement benefits.
The Association of Corporate Trustees (TACT), which represents professional pension trustees, has been asked to assess how much a bailout could cost. The move follows some estimates that put the bill at £100 million a year.
Giles Orton, chairman of TACT’s pensions committee and head of pensions at Eversheds, the law firm, said that the group had devised a questionnaire for trustees of failing schemes.
He said: “As an organisation, we hope to demonstrate that rescuing these pensioners is affordable. It is too early to quote figures. But preliminary indications are that the £100 million a year the Pensions Action Group estimated might be on the high side. The actual cost might be far less.”
A spokeswoman for the Department for Work and Pensions said that the Government’s move did not represent a change of policy and that the DWP planned to assess the extent of the problem before taking any action.
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The Guardian Thursday March 11th, 2004
The Pension Thieves
by Derek Simpson, Joint General Secretary of Amicus
Britain's pensions crisis is deepening by the day. So is public concern that not enough is being done to reverse it. The refrain used to be that employees, especially younger ones, were in denial about the need to organise decent pension provision for retirement. But now it's the government that has the blindspot. It even managed to ignore the 60,000 people protesting outside the Commons last week during a debate on the pensions bill, all victims of company schemes that have been wound up.
Research commissioned by my union, Amicus, suggests that 40% of people of working age are members of neither occupational nor private schemes, rising to nearly 50% for people within 10 years of retirement age and 64% for 16- to 24-year-olds.
These figures do not necessarily indicate a lack of foresight from employees. They are hardly surprising when you consider that Lloyds TSB, ICI, British Airways and others have closed their schemes to newcomers; and thousands lost their hard earned savings when companies such as United Engineering Forgings (UEF), Allied Steel and Wire (ASW) and Dexion went out of business.
The government has, tantalisingly, raised expectations that something is going to be done. But, on close examination, the pensions bill doesn't offer the radical changes needed. It fails to tackle the issue of compulsory contributions or the need for cast-iron protection for those who have pension savings.
"We are best when at our boldest," the Prime Minister declared. People are crying out for boldness on pensions. Of the respondents to our survey, 77% said the government was not doing enough, while nearly half said the issue would affect the way they vote in the next election.
Regulation would be good for both sides of industry. Legally enforceable protection for schemes and benefits would reward employers who make decent provision for employees' welfare in retirement, and remove the opportunity for bad employers to plunder employees' retirement income.
Many companies have seized on the short-term fall in stock-market values, which has hit pension funds, to cut employment costs for the long term. Unions fear that this is now a trend that will be reversed only if the government acts decisively.
Unfortunately, the pension bill does not compel employers and employees to contribute to occupational pension schemes, leaving it to individual choice. While the sensible course of action will still be taken by enlightened employers and staff, new work-based schemes are unlikely to be created and existing schemes will remain vulnerable to cost-cutting employers. The heart of the crisis will not be addressed.
As well as having a moral duty to encourage, even compel, people to make provision for themselves, the government must reassure those already saving that their money will be safe. Treating pensions as deferred pay, bestowing on them the same status as pay in employment contracts, would go a long way to preventing some of the arbitrary pension scheme wind-ups that have damaged confidence in the wisdom of saving for the future.
Another way of restoring confidence would be to guarantee employee involvement in the management of schemes. Full consultation rights would mean companies could not impose change while keeping members in the dark. Instead they would have to take notice of members' concerns and come to sensible agreements. Consultation would also go some way to demystifying pensions. However, even basic consultation rights are missing from the bill.
Incentives to save for retirement are vital. The government rightly sees taxation as the way to encourage this. But while the tax system gives £14bn a year towards pension contributions, half of this goes to the top 10% of earners. There must be tax changes to make pension-saving cheaper and to provide a higher rate of tax relief on pensions for lower-rate taxpayers.
We are also campaigning for a more effective pension compensation scheme in the case of a company going bust. There needs to be retrospective compensation for those who have already suffered a loss. Without it, people at companies such as ASW, Dexion and UEF face a retirement in destitution.
Using funds from the pension schemes of insolvent companies will kick-start the compensation fund and dramatically reduce the cost to the exchequer.
Pensions head the list of working people's concerns. Those who have worked hard all their lives deserve to know that they will have a comfortable retirement. But the present system far from guarantees this. It is time for the government to act on the Prime Minister's words.
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The following supportive leader appeared in Pensions Week on March 8th:
Compensation is needed to keep pensions trustworthy by Matthew Craig
The government may not like the idea of offering compensation for lost pensions, but the PPF will ring hollow if it is not willing to make good on 'pensions theft'
It is clear from the exchanges in last week's debate on the pensions bill that concern over the plight of the victims of what has been called 'pensions theft' has permeated all the political parties at Westminster.
Everyone agrees that members who have lost their occupational pension benefits when their employer has collapsed have suffered a grave injustice. The problem is deciding what should be done.
So far, the government is listening. In the words of Andrew Smith, the minister for work and pensions: "I have to tread a fine line here, on the one hand not closing down the possibility of some discretionary assistance and on the other not raising expectations that might subsequently not be filled."
Smith is right not to rule out the prospect of help, as many of those who spoke made it clear that they expected a labour government to support ordinary working men and women who tried to save for their retirement.
In the debate, the government speakers offered the pension protection fund (PPF) as their contribution to pension security. This is all very well for the future, but the PPF needs firm foundations, which includes the resolution of the 'pensions theft' issue.
The debate clearly showed that these two issues - 'pensions-theft' and the PPF - are closely related. Without finding a way to deal with the first issue, the government's promotion of the second will seem hollow.
The loss of seemingly secure benefits, if not made good, will act as a permanent memorial to the risks of pension saving in the public mind. The public will also remember the treatment of those who have lost their pensions now as a guide to the likely outcome if the PPF runs into problems in the future, as it well might.
In this sense, the question of how the government helps the former employees of ASW, Dexion and a host of other companies is a test of the government's willingness to support voluntary pensions saving.
It may not like the idea of offering compensation, but it either has to come up with a better idea, or find the least painful way of compensating those who have lost their pensions.
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The following article appeared on “The Motley Fool” website on 12th February. Many thanks to Cliff D’Arcy for permission to reproduce it here.
The Great British Pensions Scandal!
By Cliff D'Arcy
This is a long article, but I'd urge you to read it all.
The government is always harping on about how we all should be saving more for our retirement. One estimate of the so-called 'savings gap' is that we're saving £27 billion (PDF file) less than we need to enjoy a comfortable retirement. To encourage us to save more, the government released a new Pensions Bill today, which aims to improve our faith in pensions and make things fairer for everyone.
Saving for retirement is something we're very much in favour of here at the Fool. After all, the basic state pension is a little over £77 a week for a single person and almost £124 a week for a couple, which is barely enough to survive.
Ideally, if your employer operates a company pension scheme, you should join it. That's because firms usually make extra contributions on top of your payments, plus they pay the running costs. This means that you get more money invested, plus the overall charges are lower.
For example, many firms offer 'matched contributions', where they put in a pound for every pound you pay in. So, you might pay in 5% of your salary, with your employer adding a further 5%. However, thanks to tax relief, you don't pay the full 5%:
Basic-rate taxpayers get 22% relief, so their 5% costs them
5 x (1 - 0.22) = 3.9%.
Higher-rate taxpayers get 40% relief, so their 5% costs them
5 x (1 - 0.4) = 3%.
So, in this example, you put in just 3% or 3.9%, but you have 10% invested on your behalf. Not bad, eh? In theory, company pensions - especially guaranteed final-salary (or defined-benefit) schemes - are a sound investment. In fact, the government may decide to make joining them compulsory. However, when things go wrong, the results can be shocking!
Take Don Banham, for example, who joined me as a guest on the BBC Breakfast show this morning. Don worked for storage systems manufacturer Dexion in Hemel Hempstead for almost 39 years, having joined in 1964. Sadly, Don was one of around 180 Dexion staff who were made redundant last May and June, after financial difficulties forced the 56-year-old firm to call in the receivers.
That shouldn't have been a problem for Don, because he was only six months away from retirement and had been a member of Dexion's final-salary scheme from day one. In fact, Don's contract of employment obliged him to join the scheme, plus he had been paying in additional voluntary contributions (AVCs) for over twenty years. However, all was not well inside the Dexion pension fund, as it didn't have enough money in the pot to meet all its obligations to pensioners, workers and former employees. What's more, workforces and their pension funds come way down the pecking order when a failed company's creditors are ranked.
A valuation of Don's company pension scheme showed that it had an estimated shortfall of £20m. This was to prove disastrous for Don and his colleagues, many of whom had been working hard for Dexion for their entire adult lives. Dexion's pension shortfall had grown ever larger during more than three years of falling stock markets between 2000 and early 2003. Over this period, pension funds saw the value of their assets crash, since they invest largely in shares.
As well as falling investment returns, longer life expectancy (leading to lower annuity rates) and Gordon Brown's withdrawal of tax credits on pension funds' income from shares (at an annual cost of £5bn) have led many businesses to conclude that final-salary schemes have become too expensive to run. Only 1 in 5 major employers allows new starters to join a final-salary pension scheme at present.
Also, during the boom years of the 1980s and 1990s, over-optimistic expectations of future stock-market returns led many firms to cut contributions or suspend payments completely (taking 'contributions holidays'), which made pension shortfalls more likely. Indeed, tax law penalises schemes that have assets significantly in excess of their liabilities, which means that running a healthy surplus is actively discouraged at present! Bonkers, isn't it?
Nevertheless, like many workers, Don assumed that after Robert Maxwell's theft of £440m, the government had tightened up the law enough to prevent future pensions disasters. However, the Pensions Act 1995 forces pension administrators (known as trustees) to put existing pensioners first when winding up a fund.
What this means is that existing pensioners have first claim on a fund's assets when it is wound up, so workers and ex-employees get nothing until 100% of existing pensions have been secured, including future increases. Note that Gordon Brown has relaxed this 'Minimum Funding Requirement' twice since Labour came to power in 1997!
To add insult to injury, Don's pension was contracted-out of the State Earnings Related Pension Scheme (known as SERPS), which means that he isn't entitled to any additional pension from the government. That's because there isn't enough money left to cover the Guaranteed Minimum Pension that Don's National Insurance rebates should have bought.
Alas, Don's bad luck doesn't end there: his AVCs were invested with - you guessed it - Equitable Life!
The independent trustee who is winding up the Dexion pension scheme has yet to produce a full valuation. As most wind-ups take two or three years to complete, Don is forced to wait and see what pension - if any - he will eventually receive.
Don was looking forward to a happy retirement, armed with a £25,000 tax-free lump sum, plus a pension of around £250 a week. However, he predicts that he will be lucky to get a fifth of this - a mere £50 a week, and no tax-free cash. What's more, Don is sixty, so he's got five years to wait before he receives his basic state pension.
Shockingly, even profitable employers can decide to wind up a scheme, so long as it meets the Minimum Funding Requirement. Danish shipping giant Maersk closed and wound up its under-funded Sea-Land Services pension fund, which threatened to halve employee and deferred members' benefits. However, it eventually backed down under pressure.
Some workers are pinning their hopes on private-sector union Amicus, which is taking the government to the European Court of Justice for failing to enact the little-known Insolvency Rights Directive, part of European law that EU governments should have enacted. This 1982 directive means that EU governments are required to provide greater protection for the pension rights of employees whose companies become insolvent. In Italy, a group of workers took their government to court in a similar case and won.
Clearly, adequate protection must be put in place to safeguard retirement benefits. The new Pensions Bill will introduce a Pensions Protection Fund, which will rescue under-funded schemes when companies go under. The PPF would cover up to, say, 90% of retirement benefits up to a certain ceiling, say, £10,000 a year - broadly similar to the Financial Services Compensation Scheme.
The PPF will be financed by a levy on all final-salary schemes and be collected by a new Pensions Regulator. The PPF levy will initially be a flat rate, but will move to contributions based on scheme and risk factors (size, riskiness and so on).
The Bill also proposes a fairer distribution of assets between pensioners, employees and deferred members. Furthermore, profitable companies that choose to wind up ailing pension schemes will have to meet pension costs in full. However, to help pay for these improvements, the government is lowering the cap on pension increases from 5% to 2.5%. This means that pensioners' incomes will rise more slowly than they have in the past.
Unfortunately, the Bill does will not improve pensioners' position in the pecking order of creditors (it goes without saying that banks always figure at the top), nor will it cap the fees charged by independent trustees that wind up funds, which can swallow up to a quarter of a fund's assets!
This new law will be introduced by April 2005, but will not cover current victims of pension wind-ups. This means that the 60,000 unfortunate victims of around 200 pension wind-ups - including Don - have had their lives stolen from them. My personal view is that the government should give these workers justice by organising a bail-out. If you agree, please sign the Financial Mail on Sunday's petition.
Frank Field MP tried - and failed - to introduce a Bill to pay compensation to existing victims last year, and over 200 MPs have signed a motion calling on the government to honour these pension promises. Surveys indicate strong public support for this measure.
Being a sensible man, Don followed the government's advice to the letter, and he's now paid the price of Dexion's mismanagement of its pension fund. In these circumstances, the government should not leave him high and dry. Take note, Andrew Smith, Work and Pensions Secretary, and Malcolm Wicks, Pensions Minister!
There are nearly thirty million workers in the UK, so pension wind-ups have affected only around 1 in 500 of us. But the number of victims will grow before the new Bill takes effect.
Up to now, pension wind-ups have been a private-sector problem, so MPs, civil servants, NHS and other government employees are unaffected. These workers all have risk-free pensions guaranteed by the government and, ultimately, the taxpayer. So, they should have no worries, right? Very, very wrong!
Estimates suggest the total shortfall across all government-run pension schemes is greater than the national debt, which is in itself a staggering £450 billion! In fact, it's more than the total income tax that the government will collect over the next four years. One day, this black hole will have to be plugged, either by closing these schemes to new members, reducing the pension benefits available to public-sector employees, or by substantial tax hikes.
Let's hope the government does something positive about the pension wind-up scandal soon, before we consumers completely lose faith in saving for retirement - or we have another major pension meltdown.
Finally, remember that final-salary pension schemes are only as secure as the employers running them!
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Scheme members who lost their pensions when their schemes failed confronted the Conservative Party over its reluctance to support their plea for compensation.
Professional Pensions reporter Joanne McCulloch gives her account of the exchanges between Pensions Action Group spokesman John Hayter and Conservative pensions spokesman Nigel Waterson.
JH: We were compelled to join our pension schemes. Our employers assured us that everything was guaranteed and we would be secure in our retirement. Now most of us have lost our pensions. The Conservative Party is responsible for the 1995 Pensions Act - the legislation that got us in this mess - yet you are not even acknowledging there is a problem. It is disgraceful.
NW: I am not here to talk about the past. I will remind you that we are the opposition and would like to remain so for the next 15 months. What ever we develop will be properly costed and thought out - we are not the Liberal Democrats. My interest is to try to deal with these problems and to ensure the government deals with these problems.
JH: Why hasn't the Conservative Party shown support for EDM200, which is asking the government for compensation for victims like ourselves?
NW: With EDM200 I think it is not so much what our issue with it is, but rather what the government¹s issue is and they are not signing up to it.
JH: The majority of Labour backbenchers have signed it. Only 20 out of 163 Conservatives have. We want to know why.
NW: Don¹t take this amiss if I say we have not yet got a firm policy on compensation. But I think we are doing more hard thinking on it than the government are. There are one of two options. Either one makes the fund retrospective or one looks at a freestanding method of compensation. The government has said the first option is out and with the second one, all I keep hearing is this mantra about not raising false hopes. One of the options is the Frank Field route - and we supported his private members bill - which is to use unclaimed assets for this purpose. I still think that is a live option. The remaining option is to use taxpayers money. To do that the government - and it is something I need to get a handle on - needs to know the size of the commitment. We were gob-smacked when Andrew Smith said there was to be no independent inquiry into this.
JH: Who is responsible for this problem?
NW: It can be attributed to a whole range of issues - some beyond human control. You have actuaries not waking up to longer longevity, you have taxes on pension funds and this government has twice tinkered with the Minimum Funding Requirement. They have also halved interest rates.
JH: What are you going to do about it?
NW: Well, David Willetts wrote to Andrew Smith in January 2003 offering a bi-partisan approach on this, but we have not had a response.
JH: Is there a price on justice?
NW: I will pass on that one. But it is impossible to look at any one of you in the face and say you do not have a moral right to compensation.
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The pensions journal Professional Pensions has consistently run good coverage on our campaign. Its edition dated 15th January carries a sympathetic half page report (with photograph) of our Oxford Circus event.
The most interesting piece, though, is the editorial which says:
[...] there is growing unrest - not least among Labour's own backbenchers - about the government's failure to provide any compensation for scheme members who have been hit by company closures.
A total of 124 Labour backbenchers have signed a House of Commons early day motion - put forward by MP for Cardiff West Kevin Brennan and MP for Sittingbourne and Sheppey Derek wyatt- calling for government action.
So far the government has consistently turned down pleas to provide interim compensation ahead of the proposed PPF.
But [...] will the government be able to resist demands from a very large and vocal group within its own ranks?
And how will it react if Saturday's protests by workers, who lost their pension savings when their firms collapsed, begin to escalate?
If 200 or so protestors can bring traffic in London's busiest shopping street to a halt, imagine the impact if thousands or, if action in some parts of the Continent is replicated, tens of thousands take action?
The government is facing a bumpy ride.
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by Teresa Hunter, Scottish Sunday Herald 14 December 2003
Crippling cost of refusing to provide legally binding safety net
Meeting working people cheated out of their pensions by the failures of the regulatory system raises hackles over government inaction.
I SO wish readers could have been with me at Scotland’s pensions summit in Glasgow last week and heard from the horse’s mouth, so to speak, what it is like to lose your pension.
We all know the stories. Well I certainly do. I can chant the figures in my sleep of what people have lost. But it is only when you listen to an individual’s personal experiences and how it has affected their lives, their health, their families and their marriages, that you truly understand the seriousness of the problem. I was particularly moved by a short speech from former ASW worker John Benson, who had worked for the company for 43 years from the age of 15, paying into a pension most of the time.
It came as a terrible shock to him as he approached 58 to hear that the company had gone and that he had lost his job and a redundancy lump sum of £30,000. “But don’t worry”, they were told. “Your pension is safe. They can’t touch that.” Imagine his horror when, a week later, he discovered his pension had vanished too. At nearly 58, he was out of work and didn’t have a penny to live on.
The stress associated with trying to come to terms with all this pushed him to the verge of a nervous breakdown and he received medical treatment for psychological problems for three months. After that, though, he had to find work and soon realised that the only jobs he could hope for would be the kind no-one else would touch. He ended up as a baggage handler at an airport, humping heavy cases and trunks under exacting time pressures. Already worn out from a lifetime working in the engineering trade, he found himself enduring long hours at a job which would have stretched a healthy 18-year-old.
John developed chronic back trouble, and his knee began to crumble. His doctor wanted him to walk using a frame, yet John had no alternative but to keep doing the lifting job, for otherwise he had nothing to live on. Instead of looking forward to a comfortable retirement with his wife, when they could afford to spoil their grand children, after working and saving all his life and not asking for a penny from anyone, John is virtually destitute.
He said: “I am married to a wonderful woman. But there were times when I feared I might lose even my marriage. And if that happened, I just don’t think I could go on any more.”
And his is just one of 40,000 or so stories. At the end of the summit, Ayr MP Sandra Osborne asked was there anything else those assembled wanted to know? What I want to know is, why isn’t someone in jail for all this?
If a crook had broken into John’s house and stolen £200, he might go to jail. And there would then be the criminal compensation board which might offer some redress.
United Engineering Forgings workers who have also lost their pensions believe those involved in managing and advising pension schemes and their members must be investigated and legal action brought where appropriate. They have handed a dossier to the government alleging fraud, malpractice and misleading information, which officials are now investigating.
Top of the list of gripes is the fact that senior management knew the company was up for sale and were advised by their actuaries to consider getting their money out of the pension fund, while the workers were kept in the dark, and were even forced to pay more into the scheme. There’s no evidence that any of the management did take money out. But that’s hardly the point.
Dare you think of life after work?
By Neil Collins, City Editor Telegraph (Filed: 17/11/2003)
Robert Woolley is a 53-year-old who lives with his wife, Anne, in Weston-super-Mare. Over his working life he has had many employers, as most people do, but today he finds himself in a position that is highly unusual, and may even be unique.
Mr Woolley is just one of about 50,000 careful people who had been looking forward to a comfortable retirement, and now face anything from financial embarrassment to total ruin and a life on state benefits. These are the people who were in company pension schemes, and whose employers have gone bust or (in a few cases) simply shut up shop, leaving the scheme's beneficiaries high and dry.
Where Mr Woolley differs from the rest of this unfortunate crowd is that at one stage in his career, an independent financial adviser (IFA) encouraged him not to join the final salary scheme run by his new employer, an engineering company called UEF, but to take out a personal pension instead. UEF subsequently failed, and the outlook for members of the scheme who are not already pensioners is pretty bleak. Lucky Mr Woolley.
But here is the twist: thanks to the rules imposed by this wretched Government and its creatures, that IFA's advice is deemed to be quite wrong. He was giving it only because he was greedy for the commission, since the "best advice" that he's obliged to give all clients would clearly have been for Mr Woolley to join his company's scheme. Ergo, he's guilty of pension mis-selling, and liable to pay compensation.
It gets worse. The Financial Services Authority works out compensation as the sum needed to put the buyer of the personal pension into the position he would have been in, had he simply joined the company scheme in the first place. In Mr Woolley's case, that means financial wipe-out, so iron logic suggests that he owes his IFA money.
This is where the Government's desperate urge to meddle in minutiae has brought us. Its presumption has long been that everyone in the pensions business is hell-bent on ripping off the customers, who are incapable of taking any responsibility for their own actions. Pensions are a minefield, with rules of such mind-boggling complexity that ordinary mortals would probably choose bone-setting without anaesthetic to getting to grips with them.
Turning to an expert is no help. He is obliged to put you through the torture, or risk you coming back years later to claim compensation for mis-selling, because he failed to see that you were going to be made redundant, or your marriage would fail, or to predict the stock market. No wonder so many of us refuse to think about life after we stop working.
The Government shows no sign of even being aware of this problem, far less having any idea what to do about it, and it's not hard to see why. It's almost entirely a private-sector problem. MPs and civil servants have index-linked pensions linked to their final salaries, guaranteed by the taxpayer. Similar schemes are in place for the NHS, the police, teachers and the military.
Some of these liabilities are funded - i.e. there are assets in schemes to back the promises - but most are not. Like the national debt, they are merely backed by the state's ability to raise tax from its citizens. At least that debt is acknowledged, and visible. It currently stands at around £450 billion, which is considered reasonably comfortable in an economy that generates about £1,000 billion a year.
The unfunded pension promises are invisible, but not quite unmeasurable. The Government Actuary makes a stab at them, and when you look at the result, you'll see why the Government, like so many citizens, would rather not think too closely about the future.
Here they are: teachers, £115 billion; NHS, £80 billion; Civil Service, £64 billion; police and military, £74 billion. That little lot comes to £333 billion, a sum so large as to be beyond most people's comprehension. It's equivalent to £5,500 for every man, woman and child in the country and would take even Gordon Brown nine months to spend.
Or, if you prefer, it's the equivalent of nearly three years' income tax. In fact, it's probably more than that, because the NHS figures are four years out of date, reflecting the service's legendary efficiency.
Indeed, it's definitely more than that, because the Government Actuary discounts the cost of future pensions liabilities, to reflect the fact that £1 today is worth more than the promise of £1 in a decade's time. Measured the same way we measure the national debt, these public-sector pension liabilities are probably bigger than the £450 billion of the national debt itself.
Should we worry? Well, yes and no. If the national debt gets too big, governments effectively default on it by allowing inflation to erode the capital. Since public-sector pensions are index-linked, there is no escape route here.
The first step to a cure for addiction is to acknowledge the problem, and our feather-bedded politicians are not even prepared to do that. One day, they may be forced to admit that public-sector pensions are as much a tax on posterity as public-sector borrowing, and to close the schemes to new entrants, just like private-sector companies.
When that happens, we shall all be dependent on how the assets in our schemes, and the economy as a whole, perform, rather than being a dead weight on the next generation of workers. As Mr Woolley has found out, this may not be such a bad thing.
He may even get his compensation, however ludicrous an outcome that would be, but who said life was fair?
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WHAT'S THE POINT OF A BLIND PENSIONS WATCHDOG WITH NO BITE ?
Your money: It’s our responsibility to ensure we receive the correct tax credit, which makes it all the more outrageous that the UK pensions watchdog is ignoring its duty to us, says Teresa Hunter
Can anyone please tell me what is the point of OPRA, the euphemistically entitled pensions watchdog? Or rather the Outstandingly Pathetic Regulatory Authority, as I prefer to call them.
OPRA was set up in the wake of the Robert Maxwell scandal to ensure – no, don’t laugh – that never again could employees be robbed of their pensions. It has an annual budget of £15 million. To do what, you may well ask? Fiddle while Rome burns, is the only plausible answer. It certainly isn’t to safeguard our pensions, judging by the almost daily collapse of a scheme somewhere in Britain.
But if you ask the watchdog which schemes are actually in danger, or which have already collapsed, it will tell you that it doesn’t know. The Outrageously Paralysed Regulatory Authority says it has no powers to investigate a company’s solvency, and therefore the likely financial strength of the pension fund and security of the workforce’s savings.
All it can do, it says, is read the stories that appear in newspapers about schemes in trouble. But, no, it doesn’t keep the cuttings, so it can’t remember the names of any. God help us all.
Apparently, the primary duty of the Opulently Powerless Regulatory Authority concerns the so-called Minimum Funding Requirement. This was supposed to be a measure of a scheme’s financial health, but it is now three years out of date, and is generally considered utterly meaningless and inconsequential. Moreover, plenty of funds have gone down with their MFR intact, but nevertheless nursing a whacking great black hole.
Yet an army of bureaucrats at OPRA continue to arrive at work at 9am every morning, in the pretence that there is some point to their existence or purpose to their daily life. Even then, they don’t actively monitor anything. They wait for someone else to tell them if there might be a problem.
OPRA has admitted to the Sunday Herald that it is “very weak in certain areas”. A spokesman confessed: “We are not strong in our ability to correct solvency. And certainly the MFR is woefully out of date and inadequate.” And as they wait, they dish out duff advice to anyone who calls their helpline. An associate of mine did just that last week, to test out the quality of advice. He posed as a pension fund trustee, who was alarmed because the employer had cut back his contributions into the fund, which was not, anyway, overly flush with cash.
The caller stressed that the firm was not in good health and pretended to be very concerned that this could result in the scheme being wound up in shortfall. “Is it meeting its MFR?” the caller was asked. When he replied in the affirmative, he was reassured: “Then you have nothing to worry about”. Tell that to the 40,000 employees who have lost their pensions in the brave new post-Maxwell world of regulation.
Anyone claiming child tax credit needs to keep a close eye on what they are getting, and notify the Inland Revenue pretty sharply if their circumstances change. If paid too much, they will have to pay it back. And failure to return the money could result in jail. The tax credit is a complicated animal because it is based on earnings and relationships, both of which fluctuate. Money is paid to the main carer, so if a couple split up, for example, and the carer changes, the Revenue will continuing paying to the wrong partner, until notified otherwise.
As parents move in and out of work, or their earnings change, so will their entitlement. If you notify the taxman, and behave responsibly, any overpayment will be clawed back gradually by reducing the following year’s credit. But if the Revenue believes you have deliberately or negligently failed to inform, you can expect a whacking and painful bill.
16 November 2003
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BBC Radio 4 ran a thirty minute programme on pension wind-ups featuring Wille Riggans from UEF. Details and a transcript of the programme can be found here: http://news.bbc.co.uk/1/hi/programmes/inside_money/3097889.stm
FT, Money & Business June 7/8 2003
Government may yield to pressure on pensions
The government appears to be on the brink of giving in to demands for a compulsory insurance scheme to cover final salary pensions where the fund cannot meet its liabilities. This is in response to angry protests from members of schemes that have been closed and wound up, often providing less than half of the promised benefits. If such a scheme is introduced then arguably the government will also have a moral obligation to compensate an estimated 40,000 individuals who have already suffered due to the lack of a safety net. On Sunday many of these victims will take to the streets to protest. The demonstration will end at Downing Street where the marchers will present a petition to Number 10.
John Hayter, a former employee with Allied Steel & Wire (ASW), will be there. ASW went into liquidation last July. Shortly afterwards the trustees announced that the two pension schemes that covered the Sheerness and Cardiff plants, were being wound up and that the benefits of hundreds of members would be reduced by about 55 per cent.
There is neither protection nor compensation for Hayter and his fellow scheme members under current law, which is why the action group is also marching in support of Labour MP Frank Field's Pensions (Winding-up) Bill, scheduled to be read in parliament on June 20th. Field's Bill goes much further than just an insurance scheme and includes compensation for existing victims and an overhaul of the costly and time consuming winding up process. And Field wants action not further consultation. "Occupational pensions are in crisis and cannot wait any longer for a rescue operation to begin," he says.
Britain is very unusual in not having a safety net for occupational pensions and even now few people appreciate their vulnerability. "Most people still think that their pensions are secure and separate from their employer, but they're not," says Hayter, who contributed to the ASW Sheerness scheme for almost 30 years. At 59, and with a disabled wife who does not have a private pension, he was relying on his occupational pension. "Now we will have to sell our home and buy somewhere cheaper away from our family."
When Hayter started work at ASW it was compulsory to join the scheme and the rules didn't allow him to pay into any other sort of private pension plan. What's more, the scheme as a whole was contracted out of the former State earnings related pension scheme (Serps), which means that members are not entitled to an earnings related state pension on top of the flat rate 'old age' pension.
Hayter is particularly angry that he was not told about the risks that can arise when an employer becomes insolvent. "I've always worked hard and followed the advice of the government and pension experts and paid into the company scheme, which everyone said was the safest and best option to provide a retirement income. Nobody told me this could happen. If people can get compensation for the mis-selling of private pensions and mortgage endowments because they were not warned of the risks, surely we are entitled to compensation for following the government's and experts' recommendations and joining our company scheme?"
The ASW action group has identified about 40,000 people so far whose pensions have been slashed following the winding up of their company schemes. Its website (www.pensionstheft.org) is a focal point for victims and those keen to help put pressure on the government to change the law. It also includes details about Field's Bill.
Field believes that the current legislation for winding up an occupational pension scheme is seriously flawed. In particular, Section 73 of the Pensions Act 1995 requires the scheme to give priority to retired members so these 'pensions in payment', including any future increases, are secured in full through the purchase of annuities. Whatever is left over is shared between those who are still working for the company ('active' members) and those who have changed jobs but have left benefits in the scheme ('deferred' pensioners).
Field's bill makes the following proposals:
* There should be a fairer distribution of assets to ensure more equal treatment between pensioners and the active and deferred members, although existing pensioners would not have their income reduced to the point of poverty.
* The cost of winding up the scheme should be reduced. Currently the advisers charge about 4 per cent of the pension fund value for this service but often more. In one case Field said that about one-fifth of the pension fund value went in fees. His bill proposes a maximum of 1 per cent.
* The winding up process should be shortened. Typically this takes up to five years, during which time members have no guarantee of what their benefits might be and those who retire during this period cannot claim their pension.
* There should be mandatory insurance for pension schemes, as there is in the US and Germany, to cover any shortfall in meeting the promised benefits. Currently there is no protection for members except where the employer has misappropriated assets Maxwell-style.
* There should be a levy charged on 'unclaimed assets' held by financial institutions to fund a compensation scheme for those who have already lost out as a result of a wind up. The Bill identified about £20bn of unclaimed assets held by banks, building societies, insurance companies and other investments, much of which dates back over 100 years.
* There should be a review of the status of pension debt on company insolvency. At present this is the lowest ranking debt when a company ceases trading.
From the intransigent 'crisis, what crisis?' stance of the past, the pensions regulator, the main occupational pensions body and the government itself have all given tacit support to one or more of these measures. The Occupational Pensions Regulatory Authority (Opra) says it is already working towards decreasing the time for wind up, which in turn will reduce costs. The National Association of Pension Funds (NAPF) wants to see better information for members about the potential risks of pension schemes and has called for a 'safety net' to protect pension savings when schemes are closed, possibly along the lines of a mutual insurance company.
The Green Paper, published last December, set out the issues the government hopes to address, including the possibility of an insurance scheme or a central discontinuance fund. Representatives from the Department of Work and Pensions and the Government Actuary's Department have studied pension insurance and regulation in several countries and recently have had discussions with executives from the US Pension Benefit Guaranty Corporation.
Why do we need an insurance scheme?
When a scheme is wound up the assets are sold and the proceeds used to buy annuities from insurance companies to secure members' guaranteed salary-linked retirement income. These annuities pay an immediate income to retired members and provide a future income to those who have not yet reached the retirement age for the scheme. If the scheme is underfunded it simply cannot pay the 'promised' benefits.
Why are schemes so poorly funded?
There are many reasons. The cost of annuities has risen due to falling interest rates, which affect the yields on the gilts insurance companies buy to guarantee payment. We are also living longer and therefore drawing a greater total income from annuities. In addition, pension scheme surpluses have been whittled away where employers have taken a 'contribution holiday' and/or used the pension fund to pay for an early retirement programme. Andy Green, head of investment strategy at the consultant Mercer, adds: "From 1995 schemes have had to provide annual pension increases and this indexation makes the annuities more expensive, while plummeting stockmarkets have reduced pension fund values."
But how can it be legal for schemes to be so underfunded?
Good question. The current legislation states that before it can be wound up a scheme must meet the 'minimum funding requirement' (MFR). This is nowhere near enough to cover all a schemes 'promised' benefits. The government has promised to change the MFR but has yet to announce its successor.
Why isn't the fund divided fairly on wind up?
Another good question. The legislation says that the first call on the fund must be to buy annuities for retired members. After this a scheme that only meets the MFR would have enough to cover 40-60 per cent of the benefits promised to active and deferred members. This system is particularly tough on those close to retirement because they cannot make good any losses through future employment.
But we're OK as long as our employer is solvent, right?
Wrong. There is nothing to stop a solvent employer from winding up a scheme. Maersk, the Danish shipping giant, closed its Sea Land pension fund and wound it up last year, leaving members with about half of the value of their benefits. Yet Maersk is a profitable company. As employers struggle with the rising cost of their salary-linked pension schemes, others may take this step.
Doesn't the law insist employers have a pension scheme?
Yes, but the minimum requirement is to 'make available' a stakeholder scheme. There is nothing to stop an employer with an expensive salary-linked scheme from closing it and setting up a cheaper money purchase plan. Many have already done so but have left the closed scheme intact so it can continue to pay out the benefits that members have built up to the date of closure. Maersk is exceptional in actually winding up the closed scheme.
So, the government is considering insurance?
Yes. It is desperately keen for occupational schemes to help share the burden of pension provision so it will have to do something to shore up public confidence. An insurance scheme would solve many of the problems.
How would an insurance scheme work?
Dr Ros Altmann, an independent adviser to the government, suggests that this might be a flat rate premium for all scheme members, (payable by the employer or members) topped up by an employer-only premium that would increase if the funding position deteriorated. This penalty for underfunded schemes would ensure the system is fair for those employers who maintain a strong funding position.
So, once the scheme is in place I'll be safe?
That depends. The scheme will not cover all of your benefits but probably about 90 per cent up to a ceiling. For those with substantial pension benefits this ceiling will seem very low. Dr. Altmann suggests it might be set at about £10,000 of annual pension income. There may be no protection for benefits above this level, so many people will still be in a vulnerable position.
What about compensation for those who have already lost out?
At the moment there is no indication that the government is addressing this issue, which is why Frank Field's Bill is so important. If you feel strongly about it then write to your MP and the Department of Work and Pensions in support of the Bill. And if you are reading this on Saturday, there's still time to join the march! Details are at www.pensionstheft.org.
Copyright the Financial Times
07 Jun 2003 Daily Telegraph Page 3
It's a steal say steelworkers on eve of protest rally
Members of the Allied Steel & Wire (ASW) final salary pension scheme are preparing to protest in Whitehall tomorrow about the way their fund is being wound up. Most of the group's workers lost their jobs and, because of holes in the safety net, many face having their pensions cut by two thirds or more.
For example, Andrew Parr, 59, was expecting about £15,000 a year after contributing to the scheme for 22 years; now he has been told he may get less than £4,000.
Mr Parr, who worked for ASW in Sheerness, said: "I feel very bitter. I have managed to find other employment but it does not pay as much and I have no chance whatsoever of making up my pension. I wanted to retire at 60, but I will have to work until 65 and then rely on the state and the proceeds from the sale of my home."
The steel workers are not the only ones in this desperate situation. Your Money revealed last month that 50 members of the Cuthbert Heath final salary scheme - the company was a Lloyds underwriting agent - have lost all their pension income. We highlighted the case of Ian MacDougall, 57, who paid into his pension for 20 years but has lost the lot.
There are many other schemes being wound up as well having been hard hit by falls in the stock market and Chancellor Gordon Brown's pounds 5 billion-pound-a-year raid on pensions through the abolition in 1997 of the dividend tax credit.
According to the National Association of Pension Funds fewer a fifth of employers still offer a final salary scheme to new employees, while more than 40pc of those which offer a final salary scheme have closed it to new entrants. One in four companies have been forced to increase contributions as falls in the stock market have caused deficits.
The regulations governing the dividing up of final salary pension schemes, when they are wound up, was introduced in 1995 after the Robert Maxwell scandal. They dictate that people already in receipt of a pension must receive 100pc of their pension first. Next, any promised increases must be paid to them. Only after this can assets begin to be distributed to those who have yet to retire - even if they are on the cusp of retirement and have no more time to save.
If there is not enough money to go around - the minimum funding requirement for pensions only covers people who have already retired - those at the bottom of the list lose out.
Copyright: Telegraph Group Ltd
Pensions Week Article by Frank Field MP following our meeting at Westminster on 27th November
Derek Wyatt, the MP for Sittingbourne & Sheppey, brought a number of his constituents to Parliament recently. Each of them had been employed by Allied Steel & Wire before the firm announced that it would cease to trade. As a result their pension scheme is being wound up as well.
Derek's constituents were not simply hit by the loss of their job. That was bad enough, but because the company was being liquidated, the amount they would receive for being made redundant was being scaled down. Most of the workforce who had made additional voluntary contributions on top of their company pension had invested their funds in Equitable Life. So they were reeling from that blow too. And many stand to lose their homes as their endowment policies fall far short of what was expected.
But the main point of their visit was to discuss what was happening to their pensions. When the firm ceased trading the pension fund met the Minimum Funding Requirement (MFR). But meeting the MFR did not mean that pensions would be paid anywhere near the level they thought the MFR would guarantee from their regular contributions.
The cost of buying annuities for current pensioners tilted the balance of the funds away from those below retirement age. And the independent trustee, who is there to protect the nterests of the fund, appeared to be charging what I thought were exorbitant fees for the work they were required to undertake.
The ASW workers help sharpen up the Bill I am introducing this month laying down new rules for winding-up pension funds. After listening to the ASW elegation I remain convinced that the fund should be shared proportionately between current pensioners and deferred or active members - although there would need to be some minimum protection for those already over retirement age.
Having a share-out of the fund along these lines would put each member of the pension fund on an equal basis. But it would not of course ensure that any deficit owed to the pension fund by the firm was given a proper place in the pecking order in the liabilities to be met from assets the company may still own. Many companies are pushed into liquidation by the banks who head the list of creditors. Even though the banks have been often the last person to make a loan to the company, and would have done so after carefully checking the company's accounts, their position is to be first out if the future for the firm looks dodgy. Indeed, it may be that this very determination to rescue the funds recently lent to a firm means that viable operations hit the dust which might otherwise have survived. Putting bank loans further down the list might steady their nerve a little.
Equally important is to cap the size of fees independent trustees can charge. Of course they need to be paid properly for the work they undertake but the ASW workers told me of a similar scheme wound up where the independent trustee had taken £800,000 for fees out of a total pension fund at around £5m. The new Bill will propose capping these fees at 1% of the total value of the fund.
The proposed Pensions (Winding-Up) Bill will therefore consist of abolishing Clause 73 of the 1995 Pensions Act. In its place will be the requirement that the fund is allocated amongst members based on their accrued entitlement. The Bill will require the Government to review the position of liabilities to the pension fund in cases of insolvency. About 40,000 individuals have lost pension entitlement because the liquidation of their company has forced the wind-up of their pension scheme. To help make good these losses, the Bill will propose the istribution of a small amount from the orphan asset funds held by insurance companies. But the Bill will require that in future companies pay a levy so that any deficit relative to the MFR at the point of wind up will be made good.
Protection hope on ASW pensions
Western Mail November 20th
THE Government could be faced with a compensation settlement that runs into billions of pounds over its failure to protect pension provision for workers like those at Allied Steel and Wire, it was claimed last night.
Plaid Cymru believes the courts may be able to throw a lifeline for the 1,000 former employees of ASW in Cardiff who face losing a large part of their pension funds.
And the steel workers' main union, the ISTC, has already asked its top lawyers to check out whether European legislation may be the answer to its members' prayers.
Hopes now hinge on an obscure, 20-year-old EU directive that has already been successfully used to help Italian workers in a similar situation sue their government for neglecting to protect pension rights.
Adam Price, Plaid's spokesman on trade and industry in the Commons, came across the case in a speech by one of the UK's leading pension lawyers - and believes it has the potential to end the uncertainty for ASW's ex-employ-ees in Cardiff Bay and Tremorfa.
According to an article in the directive that the UK has failed to enact, EU member states must ensure "necessary measures" are taken to protect pension rights of employees of companies that are declared insolvent.
Last night, the Carmarthen East and Dinefwr MP claimed it was "unthinkable" that a Labour government would be able to contest a claim made against it for its failure to follow the directive.
"Both Tory and Labour governments have failed to provide the level of protection to workers as laid down in European law," he said.
"It would be a new low for this New Labour government if it were to uphold a Thatcherite attitude towards European social justice."
Referring to the Government's reaction to his own calls for the establishment of a nationwide pensions guarantee fund - like the one in the US - Mr Price added, "Last week, Peter Hain dismissed this idea as a gimmick. Now it turns out that it's part of European law."
Elmer Doonan, a partner at City law firm Denton Wilde Sapte - the biggest insolvency practice in the UK - and author of the article that caught Mr Price's attention, said he believed it was only a matter of time before someone filed a test case against the Government.
He said, "Potentially a member of any scheme that has been wound up since this directive was introduced in 1980 could make a claim. I suspect we will get a high profile test case - maybe from an ASW worker but there are a lot of smaller schemes where the same thing has happened as a result of what's been happening to the equities market.
"I hate to think what the final bill could be for this. But I think it would run into the billions - if the decision went the wrong way for the Government, it could be a time bomb."
The ISTC confirmed it was looking at the directive to see whether it provided an opportunity for members - including some who had paid into ASW's scheme for 30 years - to have their pension rights restored.
And Chris Keating, branch secretary for the union at ASW Cardiff, said, "Any help that we might be able to get here has to be grabbed - if this is one avenue that we can explore then we have to look at it."
A spokesman for the Department of Work and Pensions declined to make any comment on the directive until it had been fully examined by officials there in the light of the claims.
On the situation facing ASW workers, the spokesman did say, "The protection that people receive when their pension schemes are wound up is very important - and the Government understands why recent events have made the ASW scheme members question whether that protection is sufficient." It will be addressed in a Green Paper.
Sunday Times John Humphrys:
So you think your pension is in safe hands? Think again
There are lies, damned lies and pension promises. Let’s take the oldest and biggest promise first. You worked hard, paid your stamp every week and the state made sure you had a decent basic pension at the end of it. That was the deal. It was broken back in the 1980s when the Conservative government stopped increasing pensions in line with wages. It cost too much, so it cut the link and the state pension began to wither on the vine.
Labour denounced the foul deed with much passion and swore to restore the link when it was returned to power. It never happened. The new government did the same sums as the old one and decided it couldn’t afford it.
Not to worry. If you had a wee bit more money you might have invested in a second state pension, the earnings-related scheme Serps. Fine, except that in the 1990s we were encouraged to move out of that and into a private scheme.
The promise was that we would be much better off. The reality was that one insurance firm after another robbed us blind, sold us duff schemes, made a killing on commissions and ended up being forced to pay out billions to their victims.
Still, there were always the good old mutual societies with their long traditions and honourable histories — such as Equitable Life. Solid as the Rock of Gibraltar. Nothing dodgy there. Until we learnt that it had been so incompetent that its big promises were more candyfloss than rock.
We are left with the "final salary" occupational schemes. What could be safer? You paid a proportion of your salary into the pension fund every month and the company made its own contribution. Most big companies promised to put in two or three times as much as you and said if more was needed they would top it up. Forty years later you had a great pot of gold. You’d earned it. It was yours. Your retirement could be lived out in comfort because you would be paid two-thirds of your final salary for life.
I know I’ve never been the brightest penny in the mint when it comes to financial matters, but I actually believed all that. I really did believe there was a legal contract protecting the pension fund with the employer and the deal was guaranteed. I really thought it was our money. I was so naive that I was even shocked to learn that companies were entitled to take contribution "holidays" and to stop making contributions if the fund was looking healthy.
Not that it mattered much in those sunny days when the stock market kept climbing higher and the pension coffers were bursting. It did occur to me to ask what would happen if the weather turned nasty and stocks started falling but you know how it is. The company wouldn’t be allowed to mess about with our futures, would it? Not half it wouldn’t.
For a long time my naivety survived. Doubts began to set in when one big company after another announced that it was planning to close down its final salary scheme to new employees. But still, I thought, you can see their problem. Not only were shares falling, but we were also living longer so the pensions cost more to fund. Even so, I was a bit worried.
Why were the big bosses moving the goalposts now when they’d taken such splendid holidays at our expense for so many years? Instead of whining shouldn’t they be saying: "We benefited from the good years so we’ll see you through a few lean years"? Still, at least it would be all right for those people who’d been in the firm half their lives and had all that money in the pension pot. They’d be protected, wouldn’t they? They still had their final salary pensions to look forward to.
Wrong again. In the past year hundreds of mostly smaller companies have closed their final salary schemes even to existing members. How can this be — wasn’t there a contract? I can distinctly remember, even though I was a youngster at the time, my first job interview with a personnel officer (we didn’t have "human resources" then) and what he said. What he did not say was that the rules of the pension scheme allowed the company to terminate it at any time.
Did you read the rules when you signed up for your job? Most of us don’t bother. We believe what we are told. Anyway, I thought we members were protected by our trustees. Except they are not "our" trustees. Employees appoint only a third of them. The rest are company placemen.
But what really put paid to the last traces of my simple faith in company schemes was a conversation I had last week with the managing director of a British company in a large multinational group. He’d been with the company for nearly 30 years and was a member of the group’s main management committee when it was asked to consider changing pension arrangements for the employees.
When he joined he was told he must pay 5% towards his pension and the company would pay 10%. In fact, the company paid in nothing for 15 years. It never publicised the fact; it just stopped doing it. The published accounts did not distinguish between company and member contributions.
By the late 1990s there was still a surplus in the fund but the stock market was looking dodgy and the company considered closing the scheme to new employees. There would be a "money purchase" scheme instead. That’s bad for the pensioner. Instead of a protected income you get an indeterminate amount of cash and have to buy an annuity, however miserly the return may be. But at least the company would have to start making contributions again — albeit much smaller contributions.
Here, as my friend put it, was the clever bit. The "company" contribution was to be paid out of the surplus in the existing final salary scheme. Sorry to burden you with these details but, as I am beginning to learn, it’s as important to keep an eye on the small print as it is to hold onto your wallet in a crowd.
The effect of this is that the money you might think is all yours can be used to fund the pensions of the new members. And it’s all perfectly legal. Clever indeed.
I have no idea how many companies have taken this approach, nor how many more companies will shut down their final salary schemes. The way it’s looking at the moment, almost the only employees properly protected in years to come will be those in the public sector.
Part of this mess is our own fault. For years too many of us have worried only about our incomes and almost ignored our pensions. It was all too complicated to bother with and anyway everyone was getting richer, so why worry? Well, it’s time to wake up.
The big trade union Amicus is threatening industrial action to support its campaign to protect its members’ pensions. It is hard to see what that will achieve, but Roger Lyons, the Amicus general secretary, says pensions have overtaken pay as the big issue facing employees in the future and he’s right about that.
At present 60% of our pension income is from the state and 40% from personal or company pensions. The government, terrified at the prospect of the pensions burden growing out of control, wants to reverse that.
The cost for each of us is daunting. If we want to retire at 60 after 40 years’ work with a pension of half our final salary we will have to contribute at least 15% of our income. Can you afford that? Ministers have commissioned three big reports on pensions and they will be published in the autumn. One conclusion is sure to be that if we persist in living longer, then we must work longer. Forget about retiring at 60. But the government should also encourage more employers to offer decent pension schemes.
If that means giving companies tax incentives, so be it. But the schemes must be more transparent and less open to abuse. Employers cannot be allowed to make promises one year and walk away from them the next. If you or I sign a contract to buy a car on the never-never we know exactly what we will pay and what we will get at the end of it. That it should be any different when we buy a pension is little short of scandalous.
Mail on Sunday 27 August 2002: Jeff Prestridge,
A wind-up? No, a scandal
Angling is his passion, and few of his colleagues are better at it than Berni Targar. They are united in their work at steelmaker ASW and in their hobby through the company's angling club. And now they are also united in bitterness as they see their retirement dreams crushed.
Berni, 54, is secretary of Sheerness Steel Sea Angling Club, whose members come from the ASW plant, the biggest employer on the Isle of Sheppey in Kent. But Berni does not know how much longer the club will survive because the future of the plant and its 300 workers has been thrown into doubt. Last month, ASW, formerly Allied Steel & Wire, went into receivership, blaming the strong pound and a flood of cheap imports. Already, receiver KPMG has axed most of the 1,000 workers at ASW's operation in Cardiff and the future of the Sheerness plant hinges on the slender hope of KPMG finding a buyer.
'These are worrying times,' admits Berni, who lives with his wife Susan, a 51-year-old medical receptionist. ''We are all shell-shocked. Most of us have spent a big part of our working lives at Sheerness and find it difficult to envisage a future without it.' Berni has 28 years' service at the plant working as a technician. What makes the financial turmoil at ASW more distressing for the likes of Berni is the receiver's decision to scrap the company's two final-salary pension schemes - one for employees at the Cardiff operations and the other for those at Sheerness.
The plans have been put into what is called 'wind-up'. This means that workers will no longer be paid the pensions they were promised, based on length of service and their at retirement. Instead, they will receive whatever the schemes can afford to pay after the pensions of existing pensioners have been secured - the first priority when any pension scheme winds up.
Rumours abound that ASW workers could receive less than half the pensions they expected. These fears are all too justified by the experience of thousands of other workers caught in similar wind-ups. This blow has thrown Berni's retirement plans into chaos. 'I was hoping to retire at 62,' he says. 'By then, I would have accumulated more than 35 years' pensionable service, which would have earned me a pension equivalent to more than half my final salary. We were planning to pay off our mortgage and visit relatives in Australia. But now all these plans are on the back burner.
'Like many of my fellow workers, I feel bitterly let down. Over the years, we have shown great loyalty to our employer, who has rewarded us with good pay. But the winding-up of our pensions leaves us devastated and extremely worried.'
The harsh situation at ASW is not unique. Wind-ups are a growing spectre in recession-threatened Britain as many companies rein back pension costs. Some have made savings by closing final salary pension schemes to new workers or, more drastically, freezing schemes, which bars new workers from joining and stops further contributions from existing employees. But wind-ups are proving to be the most popular cost-cutting measure because they bite deep and quickly.
Recent figures from the Occupational Pensions Regulatory Authority show that wind-ups are becoming commonplace. The latest figures, for the 12 months to February 2001, show that the toll of pension schemes put into wind-up was 1,100 - more than the combined total of those closed or frozen. Many schemes have been put into wind-up by financially healthy companies simply to cut costs, reneging on pension promises to workers. As pension rules stand, there are no penalties for such companies and no redress for their employees.
In recent weeks, Financial Mail has highlighted the plight of workers trapped in pension wind-ups. They are employed in all kinds of industries, from vehicle manufacture to heavy engineering and construction, and they come from all walks of life. We have also urged the Government to stem the flood of companies winding up final salary schemes. It is our view that if company pension schemes are to have a future at the heart of the private pensions sector, there must be legal safeguards to make sure that money promised for a worker's retirement is actually paid.
The Government has already indicated that it will force employers to meet the pension entitlements of workers in full as they fall due. Details of the initiative are expected next month when Whitehall issues a consultation document. Yet any new laws are unlikely to be rushed through. And they are unlikely to help thousands who face anguish and turmoil because of wind-ups.
Victims such as Bill Taylor from Halesowen in the West Midlands. Bill, 57, has spent most of his adult life - 37 years - working for engineering firm British Federal, based in Dudley. He was chief mechanical designer for the company, which made robotic welding machines for the car industry. From April 1971, until the end of April this year, Bill contributed to British Federal's final-salary pension scheme. If he had been allowed to continue making contributions until his intended retirement in eight years, he would have been nearly eligible for a maximum permitted pension, equivalent to two-thirds of his final salary. It was not to be.
At the end of April, the British Federal scheme was frozen and workers were offered an alternative stakeholder pension. Worse was to come. Five weeks later, the company went into administrative receivership. 'I was on holiday in Greece,' recalls Bill. 'My boss told me not to rush back to work because I was being made redundant. It wasn't totally unexpected because we all knew that the company was struggling.'
A few weeks later, he was told that independent trustees were being appointed to the British Federal pension fund and the scheme was being wound up because of a £2m shortfall. Alexander Forbes, the trustees overseeing the winding-up, have told Bill that the process will take up to three years. Though Bill has lost his job and stands little chance of seeing the pension he was so looking forward to, he remains remarkably stoical.
'Not for one moment in the 31 years I contributed to the scheme did I think that my pension was anything but guaranteed,' he says. 'I paid my pension contribution, equivalent to 6% of my salary, on the nail. In return, I expected that when it came to drawing my pension, British Federal would honour its side of the bargain and pay on time and in full. Sadly, it isn't going to work out that way. Now I have to face up to the fact that I will not be getting anything like the pension I hoped for. Thankfully, I'm married to a good wife, Jill, I own my own home and I will get the opportunity to play a bit more golf than usual. I can probably afford to drift along until Christmas, but after that, I'll have to try and find a new job.'
Bill believes it is vital that the Government acts decisively to stop other workers falling victim to wind-ups. He likes the idea of an insurance-related protection scheme - a levy on all pension funds, which would pay the shortfall when funds are wound up. This scheme has been mooted by experts including Dr Ros Altmann, a Downing Street adviser. Altmann believes that wind-ups discriminate unfairly against loyal workers such as Bill.
In wind-ups, she says, the best and most loyal are often those who end up with least because less valued workers have usually been made redundant before a wind-up, often reaping early retirement benefits from the pension scheme. In wind-ups, pensions already being paid are the first to be secured. Those who have moved to other jobs, says Altmann, have also often taken a pension early or transferred benefits to another scheme. Again, wind-up protects such pensioners. But those workers who are loyal and stay with their company, or who are so good at their jobs that they are not made redundant, often end up with little or nothing for their years of service and contributions because they are last in the pecking order.
Altmann believes this situation is scandalous. She says: 'We have had umpteen reviews of pensions, we have had the recent Pickering Review trying to save defined benefit schemes by cutting the costs of running them, and still this fundamental flaw in the schemes has not been addressed.' She adds: 'There is a view in political circles that the 1995 Pensions Act protects the pensions of workers, but this is patently not the case. The Act protects pensions in payment, but not those yet to be paid. Government action is imperative. It cannot come soon enough.'
Altmann's views are strongly supported by both Paul Dunleavy from Chapeltown, Sheffield, and Peter Jackson from Cardiff. Both are victims of wind-ups and feel badly let down by the system. Paul, 53, works for Tinsley Bridge in Sheffield, which makes automotive springs and anti-roll bars for the motor industry. He is a team leader and shop steward at the plant, which employs about 160 workers. He has worked there since 1978.
He was also a trustee of the company's final salary pension scheme until October last year, when he resigned over the decision to wind up the scheme and replace it with a stakeholder plan. He wanted the scheme to be closed rather than wound up, a move that would have preserved pension benefits already built up in the fund. Paul, married to school caretaker Eileen, believes that wind-ups amount to little more than legalised robbery.
He says: 'It's like putting £100 into your bank account overnight, only for the bank to turn round the next day and say it has lost half your money. For the past 14 years, I've contributed to the Tinsley Bridge scheme under the impression that I will have something half decent to retire on. But now I find this will not be the case. I find what has happened soul-destroying and immoral.' Paul also believes that many companies have used the new stakeholder system to wriggle out of maintaining more expensive schemes.
Rather than introducing stakeholders to run alongside existing arrangements, firms have seized on them as an excuse to close down, freeze or wind up existing schemes and cut costs. He says: 'Company-sponsored stakeholders may enable more workers to save for retirement, but for many staff they are leading to a reduction in retirement benefits from employers. Surely, this is not what the Government intended when it launched stakeholder?'
Peter Jackson was among delegates from ASW Cardiff who went to the Welsh National Assembly ten days ago and confronted their MP, Rural Affairs Minister Alun Michael, and some of his colleagues over the axing of the ASW scheme. Like Altmann, Peter, 57, was astounded by the misconception widely held among MPs that the 1995 Pensions Act, introduced after the Maxwell scandal, protected employees' pensions. He says: 'The MPs we met were all under the impression that the pensions of scheme members are adequately protected since Maxwell. Yes, they are - but only if they are already being paid when a scheme hits the buffers. If you are a member who has yet to take a pension, as I am, there is precious little protection.'
Only weeks ago, Peter, a shift engineer at ASW's Cardiff rod and bar mill, thought he would be made redundant after the receiver moved in. But he and a few colleagues have been asked to stay on for an extra month on a care-and-maintenance basis, making sure that the plant remains safe and in working order in case a buyer is found for some of ASW's operations. But his pension is in jeopardy and Peter is determined to fight for every penny of his entitlement. He says: 'I have worked in this mill for 42 years and I have been a member of the company's pension scheme since I was 27. I can remember the day I joined the scheme. There was a presentation in the works canteen and we were promised a sixtieth of our final salary for every year of service, provided we contributed 5% of our pay.'
At the time, says Peter, workmates thought he was 'nuts' for joining. 'There I was, single, yet to meet my wife, Sue, footloose and fancy-free and paying into a boring old pension. Yet I've been a member ever since. And I am not now going to allow someone to rip-up 30 years of pension service and throw it in my face without a fight.' Last week, Peter was part of a campaign committee set up by former ASW workers in Cardiff.
Fellow workers at Sheerness are preparing to fight. They have also set up an action group, which met last week to discuss tactics. On the committee is 58-year-old John Hayter of Whitstable, Kent, who has worked at Sheerness for 27 years as a cranes and services electrical engineer. 'What has happened to our pensions is worse than Maxwell,' John insists. 'Maxwell did his pensions plundering under the table, so to speak. But here, the winding-up of the pension scheme - and the broken promises that result - has been executed legally with the full knowledge of the Government and the agencies employed allegedly to safeguard our pension interests. It is what I can only term legal theft and it leaves me totally disgusted and disillusioned.'
John's bitter words are echoed by most of his fellow workers at ASW Sheerness, including 39-year-old electrician Mark Pamplin from Bapchild, Kent. He has only ever worked at Sheerness and is more upset at the prospect of losing his pension than at the possibility of his employer going into receivership. Mark says: 'Though I've got a young family with three boys aged between eight and 13, I'm young enough to find other work if push comes to shove and the Sheerness steel mill shuts down. But I will not find it easy to make up for the hole blasted in my pension by the winding up of the scheme. I have contributed into it for almost 20 years. Does that now all count for nothing?'
As Berni Targar, Bill Taylor, Paul Dunleavy, Peter Jackson, John Hayter and Mark Pamplin will all testify, pension wind-ups are unfair, savage and seemingly dishonest. They are ruining the retirement prospects of hundreds of thousands of men and women, old and young, throughout the country. The Government must act to remove the curse of wind-ups. Not tomorrow, not next week, next month or next year. But TODAY.