AEA Pension Scheme

Alex Cunningham Excerpts

Wednesday 26th October 2016 Westminster Hall

[Alex Cunningham (Stockton North) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Dorries. I, too, congratulate the right hon. Member for West Dorset (Sir Oliver Letwin) on securing the debate. I am told he is quite a champion on these matters.

As others have mentioned, the AEAT scheme is a defined-benefit final salary scheme set up when AEA Technology was floated on the stock exchange in 1996. At that time, under the Atomic Energy Authority Act 1995, a condition of the privatisation agreement ensured that the benefits received by the scheme members were “no less favourable” than those they would have expected to receive from the UK Atomic Energy Agency pension scheme, set up when the Government were their employer. A month or so later, in November 1996, the Government Actuary’s Department issued the note that has been mentioned, outlining the options available to scheme members. However, those scheme members believe that they were actually encouraged to transfer into the new scheme. Sadly, as we know, in 2012 AEA Technology entered into administration and the pension fund was entered into the Pension Protection Fund.

It is worth adding that the pension benefits accrued before 1997, which would have been for all those who acted on the basis of the Government’s original commitment in the 1995 legislation, are not eligible for index-linked uprating. That is why pensioners believe they have been misled and, as a result, will be worse off. In effect, that means that those scheme members who decided to transfer their pensions following advice that their benefits would be “no less favourable” back in 1995 suddenly find themselves with a smaller pot, the real value of which is eroded by inflation every year. The campaign estimates that some members could lose half their pension pot.

Despite that, a determination by the pensions ombudsman found that the original commitment to ensuring that benefits were “no less favourable” did not amount to a guarantee against future changes to the pension benefits owing to financial difficulties. Surely the Government have responsibility to ensure that promises made to members of the UKAEA pension scheme were fulfilled, and have serious questions to answer about whether the Government actuarial note amounted to impartial guidance. Furthermore, in a Westminster Hall debate last year, the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) raised important questions as to whether the scheme received sufficient funds from its mother scheme properly to protect it against later risk of deficit. That mother scheme was apparently operating at a surplus, and some of that money disappeared into the Treasury—I wonder whether the Minister knows how much it was.

We have heard that the Government actuarial note actively encouraged members to transfer their funds to the new scheme. Although the pension scheme group notices and recognises that the note certainly did outline arguments both for and against the transfer, it believes that it dismissed all of the arguments against. That was best highlighted by the right hon. Member for West Dorset, particularly in relation to the fact that they were leaving behind a scheme that was backed by the Government.

In future, we have to ask whether scheme members can be expected to take responsibility for moving their pension savings on the basis of what has been described as impartial advice. Has the Minister examined the evidence in question? If it is apparent that amendments were made to obscure the risks of changing the offer and moving the scheme, will he agree to take action? Last year, the then Pensions Minister argued that the Government could not possibly act without setting a precedent for other formerly state-owned enterprises. I do not see that that needs to be the case. Given the points made about alleged amendments to the note from the Government Actuary’s Department at the request of the UKAEA, surely these pension fund holders are in a unique position.

Clearly, pre-package administration deals are sometimes necessary to ensure that the process of insolvency can be managed quickly and effectively in a rapidly evolving insolvency situation. As we have seen recently, for example in the case of Bernard Matthews, there are instances where pre-package deals have negatively affected employees’ pension entitlements while allowing parent companies to walk away from insolvency with very large sums of money. What plans does the Minister have to look more closely at an expanded role for the Pensions Regulator to intervene earlier in the process when a number of warning signs are triggered? How will the Minister ensure that pre-package administration deals are not used as a vehicle for employers to reduce their pension responsibilities?

Given the promise made by Government to ex-Government scheme members that their benefits would be protected, the criticisms made of the guidance offered by the Government Actuary’s Department note, and what many believe to be the failure to properly resource the new scheme to ensure it would be put on a sustainable footing, will the Minister agree to consult scheme members to explore all avenues for redress? Will he also agree to strengthen the governance of defined-benefit pensions schemes to ensure that scheme members’ pensions are better protected in future cases of insolvency? I recognise that this may not be a simple matter, but if the advice that was given to the pensioners was flawed, someone needs to take responsibility for the members’ losses. I hope the Minister will now do that.