Trawlermen’s Pensions

Alan Johnson Excerpts

Wednesday 2nd March 2011 Commons Chamber

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

The purpose of the debate is to bring to the attention of the House and the Minister a scandal involving the maladministration of a pension scheme that has left thousands of distant water trawlermen who reached retirement age up to 30 years ago without a penny of the pension to which they contributed, and thousands more unlikely to receive their pension in future. I am pleased to be joined this evening by hon. Members who represent port constituencies, such as my hon. Friend the Member for Tynemouth (Mr Campbell), the hon. Member for Banff and Buchan (Dr Whiteford) and my hon. Friends the Members for Kingston upon Hull North (Diana Johnson), for Kingston upon Hull East (Karl Turner), for Scunthorpe (Nic Dakin) and for Great Grimsby (Austin Mitchell).

I shall set the context. Distant water trawlermen worked in the most arduous and hazardous occupation imaginable, working 18-hour shifts in Arctic waters where temperatures could fall as low as 40° below freezing. In 150 years of distant water trawling from Hull, which was exclusively a distant water port and the biggest in the world, 900 ships were lost at sea—that is six a year—and 6,000 trawlermen were killed. The mortality rate was 14 times higher than in coal mining.

When the industry collapsed as a result of the agreement between Britain and Iceland that ended the so-called cod wars in 1976, a Government Minister, from the Dispatch Box, promised the men compensation, retraining and redeployment. They received nothing. Classified as casual workers, they were thrown on the scrap heap. While the trawler owners were paid millions of pounds in decommissioning grants, not a brass farthing was paid to the trawlermen themselves. That injustice was belatedly rectified by the compensation scheme that the previous Government introduced in 2000, although one aspect of it is still outstanding, and my hon. Friend the Member for Great Grimsby and I have referred it to the parliamentary ombudsman.

As we worked with the ex-trawlermen to achieve that compensation, a number of them referred to a pension scheme that operated in the industry. Some men over 50 had been allowed to commute their pension to a one-off payment, to alleviate the hardship that they suffered as the industry collapsed, but many men said that they could not remember receiving anything from the scheme, even though they were now well beyond pensionable age.

I ascertained that there was indeed a fishermen’s pension scheme, which had been established on 1 April 1961 by a trust deed made on 19 December 1960 between British Trawlers Federation Ltd and Lowndes Associated Pensions Ltd. The scheme was compulsory for those coming into the industry after the date of its introduction. It was a contributory scheme, with the men originally paying sixpence per sea day and the employer ninepence. I add that that is old pence, as a few Members will not remember the conversion to decimal currency, so those sums were 2.5p and 4p respectively. Contributions to the scheme ceased in 1979, and benefits ceased to accrue. The benefits accrued up to the date of discontinuance were secured by a group deferred annuity contract underwritten by Norwich Union, which is now Aviva. Capital Cranfield became the trustee when it acquired Lowndes in April 2000.

Having established those facts, I wrote to Aviva in 2006 to find out whether any pensions remained unpaid. My impression was that there might be about 100 such cases. By 2007, I had discovered the full horror story of a scheme in which few records had been kept and no efforts had been made to track down the men whose pensions were due. More than 4,500 trawlermen from Hull, Grimsby, Aberdeen, Fleetwood, Milford Haven and North Shields had reached pensionable age from the 1980s onwards without receiving the pension that they were due. About a quarter of them were from Hull.

The reason for that disgraceful maladministration was that the only record kept of members was their surname, initials and date of birth. There was no record of the men’s national insurance numbers, their addresses or any other pertinent information by which they could be traced. There had been no attempt to rectify the situation and nobody in the communities affected was alerted to the problem, least of all the MPs. The unpaid pensions simply remained in the fund while many of the men affected lived out their old age in penury.

Aviva, the insurer, had been paying benefits—or more accurately not paying benefits—without the intervention of the trustees since 1986, at the request of the then trustee, Sedgwick Noble Lowndes, which, as I said, is now part of Capital Cranfield. That in itself seems a strange arrangement and one that neither party should have allowed.

As well as the 4,500 men who had reached pensionable age, there were 8,879 still below 65 with little prospect of receiving their money as they became eligible. Since I wrote to the then Secretary of State for Work and Pensions and the Pensions Regulator in January 2007 to alert them to the scandal, a great deal of effort has gone into finding the missing fishermen.

Aviva has worked with local MPs on the Find the Fisherman campaign, which we agreed should run for two years. At the end of that time, in October 2009, Members of Parliament met Aviva and Capital Cranfield to take stock. Aviva, in its briefing note for this debate, talks about unclaimed assets being “common across the industry” and, after setting out details of the Find the Fisherman campaign, states that “some members remain unpaid”.

For “some”, read 6,837. That is the figure that we were given for the men who had not been—and probably never would be—traced at the end of the campaign. That is more than half the scheme membership. Perhaps the Minister will tell me whether he believes that that level of unclaimed assets is at all “common across the industry”.

With my hon. Friends the Members for Great Grimsby and for Aberdeen North (Mr Doran) and my former hon. Friends the Members for Cleethorpes and for Blackpool, North and Fleetwood, who also attended the meeting with Aviva and Capital Cranfield in October 2009, I put forward proposals that would allow the schemes to be wound up fairly.

First, we would need to agree how to distribute the surplus in the scheme coffers. At that time it was £2 million, although I heard this morning that Capital Cranfield is saying it is £1.3 million. The disparity has yet to be explained to us.

Secondly, provision needs to be made for unidentified beneficiaries who may come forward in future. Thirdly, we sought payment to the 50-odd families for whom payment is disputed. Those are cases in which Aviva says that the money has been paid, usually in the 1980s, but it has no proof of payment and the families are adamant that it was never received.

In that respect, let me explain how the payment system worked as described by the chief executive of Aviva in a letter to one of my constituents:

“When an employer wanted to claim a pension on behalf of one of his employees he would make an application to the Royal National Mission”—

the seaman’s mission—

“who acted as an intermediary and would in turn apply to Norwich Union on behalf of the employer. Norwich Union would verify the details against the policy and authorise a payment to be made to the Mission who would then pay the employer so they are able to pass the money on to the individual fisherman”.

He goes on:

“I appreciate this will appear unnecessarily complex but, rightly or wrongly, this is how payments were settled in the past”.

I think that we would all agree that it was “wrongly”.

A scheme with no national insurance numbers and no addresses relied on trawler owners, who were gradually disappearing as the industry was in terminal decline, to go through the seaman’s mission—which incidentally informed Norwich Union, as it was then, 12 years ago that it did not have the resources to undertake this work—to give cheques to men who in the main did not have bank accounts.

[Jim Shannon (Strangford) (DUP)]

From my knowledge of the fishing industry and how it works, I would say that sometimes fishing organisations that represent the people have a record of their membership. I am sure that that has been checked, but if not, it may be a method, even at this late stage, of getting a wee bit more information.

[Alan Johnson]

I appreciate the hon. Gentleman’s suggestion. He is right—records are kept. We have looked at all those possible avenues, including the DWP’s tracing arrangements and the former Department of Trade and Industry’s records of trawlermen. We have exhausted every avenue to try to find those men.

Perhaps the Minister will understand why we say, given the convoluted way in which the payments were made, that the benefit of considerable doubt in disputed cases should rest with the men and their families.

Our final proposal concerns recompense. We feel strongly that some compensation should be paid to the men and/or their communities for the appalling way in which the scheme has been administered.

The trustees and the insurers had a financial and moral responsibility to scheme members, which they failed to fulfil. The way this scheme operated would have shamed an office sweepstake organiser. The fact that the men whose interests they should have safeguarded did one of the most difficult and dangerous jobs imaginable, and in the main spent their old age scraping for every penny while money that could have eased their plight was never paid to them, adds to the sense of injustice within those proud communities.

Since October 2009, we have been fortunate to have the services of a pensions expert from Thompsons solicitors working pro bono on our behalf to try to bring the arrangements discussed then to a successful conclusion. Seventeen months later, there has been little progress, and no further approaches to the port MPs by Aviva or Capital Cranfield to resolve the outstanding issues.

In the absence of any ex-trawlermen or anyone from the affected communities among the trustees, I believe it is incumbent on Aviva-Capital Cranfield to seek the approval of the port MPs for the final arrangements to wind up these schemes. Perhaps the Minister will tell us to whom those are companies answerable. I understand that they are proposing to agree their own fees for the wind up—the money will come from the scheme. There must surely be some external oversight of those arrangements.

The port MPs wish to meet the Minister to explore the issues surrounding that scheme and smaller associated schemes in more detail, and we think that it would be beneficial to have the Pensions Regulator present. Surely he must have a role in ensuring that the schemes are wound up in an orderly and timely fashion, with the interests of the members properly protected.

We seek from the Minister nothing beyond his understanding of how badly this scheme has been administered and his assistance in bringing this long saga to a conclusion that is acceptable to port MPs, as virtually the only remaining representatives of those fishing communities. We seek no public money and no taxpayer contributions.

Finally, I ask the House to imagine the outcry there would be if thousands of bankers, civil servants, or even former MPs had been treated in such a way. That would be a huge story that we would be following regularly in the national media. This has been an almost silent scandal, but this evening’s debate will, I hope, bring it to the attention of a wider audience in the quest for justice for communities who contributed so much, sacrificed so many and yet were treated so abysmally.

--- Later in debate ---

[The Minister of State, Department for Work and Pensions (Steve Webb)]

It is common courtesy, simply as a matter of routine, to congratulate the Member who has secured a debate, but in this case I sincerely congratulate the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), because he has a track record of campaigning on this issue over a number of years. I looked at some of the articles on his website, and I recognise that he and other right hon. and hon. Members have done an important service to their constituents and the trawlermen. He spoke powerfully and evocatively about the lives that they led and their quite proper demand for justice.

I pay tribute to the right hon. Gentleman for that work and for, as he said, giving a voice to what has to some extent been a silent campaign. I must admit that when the titled “Trawlermen’s pensions” came out of the hat, I raised an eyebrow and wondered what the subject was. As I have read up on the issue and as my officials have provided me with briefings, I have been quite startled by, as has been said, the shoddy record keeping of the various schemes right from the beginning. It seems incredible to think that a pension scheme could have just a name, an initial and a date of birth—for example, “Smith, J., 1920”, or whatever. It just seems hopeless.

It was clearly a different world back then. We did not have the Pensions Regulator, a pensions ombudsman, the Pensions Advisory Service or the pension tracing service. A lot of those institutions have come about partly to ensure that such situations do not arise again. I want to talk predominantly about the trawlermen and their situation this evening, but I should also say that good record keeping in company pension schemes has not completely gone away as an issue. Even this year, the regulator has been doing more work to ensure that schemes keep proper records. I would like to use this opportunity to reiterate the vital importance both of schemes keeping proper records—something that the trawlermen’s case demonstrates—and, if records are not in order, of doing something now to put them in order to avoid a recurrence of anything similar.

Let me draw together where we are now and where we go from here. I recognise that in the limited time available I might not be able to cover all the detail that I would like to, so let me say that I would be more than happy to meet the right hon. Gentleman and his colleagues to discuss how we might take matters further, although I do have an update for him of where we have progressed things in the interim.

We are talking about five schemes, all of which are now administered by Aviva. One confusing aspect of this situation is that the schemes have traded under different names at different times. The principal scheme is the fishermen’s pension scheme, which had around £1.3 million of assets as of June 2010, as the right hon. Gentleman said—obviously these things fluctuate—and around 4,800 remaining members, but there are four others: the Fleetwood fishermen’s scheme, the Scottish trawler fishermen’s pension scheme, the Fairtry pension scheme and the Hull fish merchants’ pension scheme. The right hon. Gentleman talked about tuppence-ha’penny and fourpence going in, but what is unusual about those schemes is that, essentially, the amounts coming from them are in many cases not pensions at all, but lump sums of, say, £300 or £400. This leads to confusion about where some of the money has gone. If someone was told that they were paid a pension but they said that they were not, it would be obvious and easy to decide, but on the whole we are talking not about pensions but about a right to a small amount relative to a lifetime of pension receipt. In the past, those amounts were often paid as lump sums.

[Alan Johnson]

I am grateful to the Minister for giving way and for agreeing to a meeting. The amounts involved average £600, and, as with any average, many of the amounts are higher. The people involved did not have bank accounts, and when the battle rages about disputed payments—there are about 53 cases—it is important to recognise that fact. One of my constituents, unusually, had a bank account in the 1980s and he was able absolutely to prove his case. Aviva said it had sent the money via the seaman’s mission and the employer so that it eventually ended with him, but he was able to prove from his bank account that the money had not arrived. In the one case where there is any proof, we can see that it clearly supported the side of the trawlermen and their families. That is why we say that people should be given the benefit of the doubt.

[Steve Webb]

One issue that I know has been suggested to the right hon. Gentleman in the past, but as far as I am aware has not so far been taken up—he will correct me if I am wrong—is how far the pensions ombudsman could be used for this purpose. There are issues of cases being out of time, but it might be worth considering whether the pensions ombudsman can provide a route to resolve some of the disputed cases. It is an issue that we could discuss further.

The right hon. Member for Kingston upon Hull West and the hon. Member for Great Grimsby (Austin Mitchell) stressed the need to wind the schemes up as soon as possible. One problem has been the absence of trustees and the difficulty of tracking people down. I asked my officials to speak to the Pensions Regulator on that very subject. As the former Secretary of State will know, the regulator is operationally independent of the Department and therefore cannot be told what to do by me, although I am sure that he is doing his best for the trawlermen.

We spoke to the Pensions Regulator’s office today to find out the latest information and to try to ensure that things move forward as quickly as possible. The regulator confirmed that he expects Capital Cranfield to be appointed to the other three schemes where it is not already the trustee. I understand that the appointments are imminent. Capital Cranfield will be in a position to resolve issues quickly, and I certainly hope that it will do so.

I should add, given that the hon. Member for Great Grimsby asked about costs and charges, that Capital Cranfield has confirmed that it is willing to take on the trusteeship of the additional schemes at no charge. The regulator is taking all urgent steps to get the trustees in place quickly—within weeks. I hope that getting those trustees in place and getting the schemes dealt with by a single trustee will represent an important step forward. My impression from the briefing provided by Capital Cranfield is that the lessons learned from the biggest scheme can be applied quickly across all schemes to bring these matters to a satisfactory conclusion.

The decision about what should happen to the balance of the funds is important. The right hon. Gentleman will appreciate that this issue is governed by a number of factors—fundamentally, trust law and tax law. There are formidable barriers to taking money from a pension fund under trust law for which tax relief and so forth is given. There is quite a web—if you will pardon the phrase, Mr Speaker—of complex legislation surrounding the use of that money for an entirely laudable purpose, but one that is different from the trust’s original purpose. I believe that Capital Cranfield has looked at that option and I know that the right hon. Gentleman is in dialogue with it. I would be happy to discuss it further with him when we meet, but I place on record the fact that there is a significant barrier to that approach.

Very much prompted by the right hon. Gentleman’s efforts, Aviva undertook the Find a Fisherman exercise. I understand that one further exercise is being undertaken to try to track down those who might not have made claims. This uses a service known as Assets Reunited and it is used to track down any people not already found. It is a dwindling exercise, but I am pleased to hear that this ongoing effort is being made.

The right hon. Gentleman asked to whom the companies involved are answerable. There is a sequence. They are answerable initially to the members of the scheme, who have some representation—typically they are represented by the trustees, although the position varies—and are then answerable to the regulator. The regulator is becoming very involved, and I welcome the work that it has already done. In the event of maladministration, that is where the pensions ombudsman comes in. I should be happy to discuss with Opposition Members the scope for involving the ombudsman, particularly in the disputed cases.

I understand that the overall sum that we are discussing is about £1.7 million across the five schemes, and, as we have heard, there are between 6,500 and 7,000 untraced members. Given that the record keeping was so poor, it is not surprising—although entirely to be condemned—that it has been impossible to trace half the members involved. It is reasonable to assume that, thanks to the efforts of the Pensions Regulator to improve record keeping, the failure to find members will not be repeated on the same scale. As I have said, the problem does not occur as much in large, well-run schemes, but one of the features of pension funds is a very long tail. In many very small schemes record keeping may not be particularly good, and problems not dissimilar to this may well have arisen in other schemes. As was pointed out by the hon. Member for Great Grimsby, over a period the assets of the schemes and member records have passed through various companies owing to corporate amalgamations and acquisitions, which has increased the difficulty of tracking people down and finding out what has happened to the money.

Capital Cranfield has expressed the hope that matters will be pretty close to resolution by, certainly, the end of this year. I know that the right hon. Member for Kingston upon Hull West and Hessle has been involved in the issue for about four years, but these schemes were set up 50 years ago, and it has been a long saga. I entirely agree with the right hon. Gentleman that the sooner we can resolve the matter and convey the money to the people who should have it, the better.

There is also the question of the balance of the fund. I shall leave aside for the moment the idea of an alternative charitable or other use. In the normal sequence of events, part of the balance would be used to buy a deferred annuity for any deferred member who might no longer be a trawlerman—presumably that applies to pretty much all of them now—and who had not yet reached pension age within the scheme: in other words, to buy a product that would match the pension promise made to that scheme member. That would be the first call on the funds, but a second possibility would be the purchase of an insurance policy. If new members turned up after the scheme had been wound up, the policy would pay out and they could also make a claim.

If, after all that, there was a surplus in the fund, it would be a matter for the trustees and the administrators to consider how the money is allocated. I understand that the most straightforward option available—although it is a matter for them, not for me—is to allocate the money to the people who are still members of the scheme. One of the questions that I have asked when we have discussed the matter in the Department is whether it would be possible to pay it to the people who had received the lump sum some years ago, but in many cases that money was paid and those people cannot be traced.

I congratulate the right hon. Member for Kingston upon Hull West and Hessle on raising an important issue of injustice. I am happy to commit myself to working with him and with the Pensions Regulator to try to bring the matter to a satisfactory conclusion.

Question put and agreed to.