AEA Technology Pension Scheme

Baroness Blackwood of North Oxford Excerpts

Wednesday 18th March 2015 Westminster Hall

[Geoffrey Clifton-Brown]

My hon. Friend has made his point cogently. I will return to the matter of compensation later in my speech.

Once part of the new scheme, members were encouraged to transfer all accrued pension service from the UKAEA scheme, by a leaflet presented as impartial advice from the Government Actuary’s Department; it has recently been found that the leaflet was changed several times at the request of the UKAEA to remove references to risks involved in the transfer. Scheme members were assured that their pension would be safe. As both schemes were based on final salary, the decision by scheme members on whether to transfer service to the new scheme or to freeze it in the UKAEA scheme was based on a judgment of what would happen to their own salary in future years. They could not make the decision based on whether the new scheme contained more risk, since they had not been warned of any.

[Nicola Blackwood (Oxford West and Abingdon) (Con)]

The AEA Technology staff are nuclear physicists accustomed to identifying risk and weighing cost-benefit. If they could not identify risk within the GAD advice, who could have?

[Geoffrey Clifton-Brown]

My hon. Friend makes a really potent point, which I will come on to later in my speech.

People had not been warned of the risks by the official leaflets that they received. The AEA Technology pension scheme received an initial injection of cash from its mother scheme, the UKAEA scheme, based on the accrued service and pension entitlements of the transferred members. The mother scheme was operating with a notional surplus at the time, but none of that surplus was passed to the new scheme, giving the Treasury an increased windfall. Since the AEA Technology pension scheme ran into deficit because of changes in actuarial valuations, it has now become apparent that insufficient funds were transferred into it when it was set up. Moreover, no written agreements appear to have been made to cover such an eventuality. In other words, either the Government have a continuing moral, and possibly legal, duty to those transferred members or they cannot have fully discharged their responsibility under the Atomic Energy Authority Act.

The Department for Work and Pensions has suggested the requirements of the Act may have been fulfilled because when it was launched the benefits from the new scheme matched those of the mother scheme. However, none of the transferring scheme members—my hon. Friend has made the very good point that they were extremely bright and able people—were eligible to draw benefits at the time, because none of them were retired, so the DWP’s claim cannot be true. The Act’s intention must have been that the new pension scheme would not change in future years if the UKAEA one did not, meaning the benefits were secure.

It is now proposed that the AEA Technology pension scheme be transferred to the Pension Protection Fund, where index-linking of benefits would be removed and replaced by an inflationary allowance, capped at a maximum of 2.5% for service from April 1997 onwards. That covers almost all post-privatisation service. It would further mean that all index-linking would be removed from service prior to that date—that is, from all service transferred from the Government sector, which the scheme members were told was secure. In addition, all members below retirement age would suffer a further 10% drop in their pension. The overall effect is a greatly diminished pension that is far less than the benefits that would have been due from the UKAEA scheme. It would not be equivalent, as was specified in the Atomic Energy Authority Act.