HUTTON FACES JUDICIAL REVIEW OF REJECTION OF PARLIAMENTARY OMBUDSMAN PENSION REPORT

HIGH COURT CHALLENGE TO GOVERNMENT’S ‘IRRATIONAL AND UNLAWFUL’ RESPONSE LAUNCHED THIS AFTERNOON

Press release by Dr. Ros Altmann
Wednesday 14 June 2006

Papers have today been lodged in the High Court of Justice, against the Secretary of State for Work and Pensions – John Hutton requesting a Judicial Review of the Government’s decision to reject the findings and recommendations of the Parliamentary Ombudsman’s report ‘Trusting in the Pensions Promise’. 

This case is being brought on behalf of all those who have suffered injustice and loss when their company pension scheme wound up and was found to have insufficient assets to meet the payment of their expected pensions, even though Government assured that public that such schemes were safe and protected by law.  Together with the Pensions Action Group, I have put forward 4 claimants who have lost some or all of their occupational pension following the winding-up of their scheme and we will seek to prove that the Government’s response is irrational, unreasonable and unlawful. 

We are claiming that no reasonable Minister could consider that the findings of maladministration ‘cannot be supported by the facts’ as the Secretary of State has declared.  The Parliamentary Ombudsman’s report clearly sets out these facts and, therefore, the Government’s reasoning is flawed and confused.

The Government’s response does not address the findings that the Government’s official information and public statements were ‘sometimes inaccurate, often incomplete, largely inconsistent and potentially misleading’.  Instead, it argues that official information was produced for different purposes, for various audiences and that no reader could be left in any doubt that the information was not a full explanation of all the terms and effects of final salary pension schemes.  This argument is beside the point, no-one would expect the material to be complete.  The Parliamentary Ombudsman concluded that the Government is guilty of maladministration because it failed to mention the risk - which it had itself created - that pension scheme members could lose some or all of their accrued pension rights when their scheme wound up.  Indeed, the leaflets did mention risks, but not the most significant risk of pension losses on wind-up.

Since the DWP encouraged people to join or remain in their company pension scheme and assumed responsibility for providing what it called ‘impartial’ information to the public, which failed to mention the losses that could arise if a scheme wound up, and also since it (and not trustees) was responsible for the rules which govern wind-up, it created a legitimate expectation that members would be able to recover all their accrued benefits on wind-up.  The Government has not addressed these arguments.

We also assert that the Government has misunderstood the report’s recommendations and its rejection was based on misleading estimates of potential costs to the taxpayer.  Firstly, the Report does not recommend that replacement of losses must be funded by the taxpayer, it simply says that the Government should consider how it could replace lost benefits (for example, using unclaimed assets).  In its hasty rejection of the Report, the Government has not done this.  Furthermore, calculations attempting to justify the estimated ‘£15billion’ cost of compensation are misleading and flawed, since the proper figure is between £2.9 and £3.7billion.

Finally, we claim that the Government is in breach of its obligations under Article 1 of the 1st Protocol of the European Convention of Human Rights.  Under this legislation, Governments have a duty to take reasonable and appropriate steps to protect individuals from losing their pensions and to warn them of particular risks.  Failure to do so means that the Government is obliged to compensate those affected, which it has refused to do.  This refusal is unlawful under Section 6 of the Human Rights Act 1998.

Notes:
1.  Up to 125,000 people have lost some or all of their occupational pensions when their company scheme wound up. 

2.  These people were all led to believe, by the Government, that their pensions were safe, protected by law and even guaranteed.

3.  Many have also lost some or all of their ‘Guaranteed Minimum Pension’ rights (which were supposed to replace members’ additional state pension in contracted out schemes.)  This means that people who saved for decades in their company scheme have ended up with less pension than they would have received if they had never put any money into a company pension at all!

4.  This situation does not only affect members of schemes whose employer is insolvent.  Even solvent companies could just decide to wind-up their pension scheme and the law only required them to pay in enough to ensure that the scheme was 100% funded on the Government’s minimum funding standard (MFR), which is, in practice, woefully inadequate to actually buy the members’ promised pensions with bulk annuities (which winding-up schemes have to do).

5.  The Parliamentary Ombudsman, after conducting a detailed 16-month independent inquiry, concluded that the Government was guilty of maladministration in its oversight of the occupational pension system and that it should replace the lost pensions and other  benefits of those who have been affected between 1997 and 2005 and also that they should receive ‘consolatory payments’ for the stress they have suffered.

6.  The Report was laid in the House of Commons and House of Lords (in itself an unusual step and a sign of the strength of feeling the Ombudsman had for this issue) and, in an almost unprecedented move, the Government immediately rejected the findings and almost all the recommendations of the Report. 

7.  The barristers are Dinah Rose and Tom Hickman of Blackstone Chambers and the solicitors are Stephen Grosz and John Halford of Bindman & Co.
 
8.  The Public Administration Select Committee (PASC) of the House of Commons is also conducting an inquiry into the Government's rejection of the Ombudsman's report.  As the hearings are already underway and as we would far rather that Parliament itself rectifies this injustice, rather than the Courts forcing the Government to change its mind, we have asked the Court to adjourn the application until after the PASC has completed its investigation.

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