United Kingdom Atomic Energy Authority Pension Transfers (Parliamentary And Health Service Ombudsman Investigation)

David Johnston Excerpts

1st reading
Wednesday 21st July 2021 Commons Chamber

[David Johnston (Wantage) (Con)]

I beg to move,

That leave be given to bring in a Bill to make provision to enable the Parliamentary and Health Service Ombudsman to investigate advice and information given by the Secretary of State and the Government Actuary relating to transfers of pensions from the United Kingdom Atomic Energy Authority pension schemes to the AEA Technology pension scheme; and for connected purposes.

In rising to present this Bill, I build on the work of my predecessor, now in the other place as Lord Vaizey of Didcot, who introduced the same Bill five months before he stood down. I am grateful to him and to other Members who supported him, as they have me, such as my hon. Friends the Members for Mole Valley (Sir Paul Beresford) and for Henley (John Howell). I am particularly grateful to the AEA Technology Pensions Campaign. There are too many of them to mention, but I will just mention Tony Reading, a constituent of mine, who chairs the campaign and has worked with me closely on getting to this point.

In 1996, the commercial activities of the UK Atomic Energy Authority were privatised, and a company called AEA Technology was created. As part of the transfer of staff to that new company, there was a decision to be made about what would happen to people’s pensions. The employees were presented with what they were told was a time-limited offer, under which they would have 40 days to transfer to the new defined-benefit scheme. They were told that they would get identical, or very close to identical, benefits to those that they were already getting, and that it was unlikely that that benefit promise would ever be broken, so 90% of them opted to transfer.

So far, so routine—except in 2012, less than two decades after the company was created, it went into pre-pack administration and the pensions went into the Pension Protection Fund. At this point, Members may think, “Well, that’s sad for the pensioners, but there have been a lot of problems with pensions turning out to be a lot less valuable than was originally expected, and at least they were in the Pension Protection Fund, which some schemes did not get into.” However, there are two aspects of this case that make it unique.

The first is the promise that was given to the pensioners, including by the Government. They were told that they were going to get identical, or close to identical terms. They were told that it was very unlikely that the benefit promise would ever be broken. They were told they would get a scheme that was no less favourable than the one they were in. They were assured from the Dispatch Box, in fact, by the Minister of the time, 25 years ago, that their terms and conditions and their pension benefits would be fully protected. In fact, on average, their pensions are worth around 35% less than they used to be—some of them 20% less, but some of them 40% or 50% less.

The second aspect of this case that is unique is the role that the Government Actuary’s Department played at that time. It drafted guidance for the employees to help them to decide whether to transfer their pensions, but AEA Technology, the company that had been created, did not like the look of that guidance. It wrote to the Government Actuary’s Department, saying:

“We believe the general tone of this note is likely to discourage people from transferring to the AEAT scheme…and have suggested a few places where the tone could be modified.”

What the company meant by “modified”, of course, was a strengthening of the encouragement being given to the pensioners to transfer, which is where the various promises that they were given come in. That is why 90% of them opted to transfer. The Government Actuary’s Department produced its guidance having conducted no risk assessment of the new pension scheme that was being created. This was a completely unproven company, and in the light of what happened, the pensioners would have been better with a more cautious note telling them about the possible risks. It is only thanks to dogged work by the pension campaign group that they have managed to obtain the documents—through freedom of information requests—which show exactly what happened in the process leading to much stronger encouragement to them all not to worry about what was going to happen to their pensions if they transferred.

The majority of these pensioners are in my constituency, but they are spread across the country. Ordinarily, in a situation like this, I—along with the other Members whose constituents are affected—would be signing an application to the Parliamentary and Health Service Ombudsman, so that the information and advice given by the Government Actuary’s Department could be looked into. However, when my predecessor and other Members wrote to the ombudsman, and when I wrote to the ombudsman along with other Members, on both occasions the response was that it was not within the ombudsman’s remit to look at that information and advice, although the pensioners were told for a number of years that their means of obtaining redress was to go to the ombudsman.

Now we come to the point of this Bill. We will have an ombudsman Bill at some point, but it is not coming in the near future. I have discussed with the Chair of the Work and Pensions Committee, the right hon. Member for East Ham (Stephen Timms), whether there could be an inquiry or investigation into the case, but he has said, quite understandably, that because of the unique nature of the case—because it does not involve a group of pensions being affected in the same way—it is not the kind of case that the Committee would look into. As I say, I completely understand why that is.

The purpose of the Bill is to enable the Parliamentary and Health Service Ombudsman to look at the information and advice that was given in this case. It is not asking for a large amount of money in compensation, and it is not condemning the Government Actuary’s Department. It is a very specifically targeted Bill, which, while it may seem small and technical, will finally, I trust, give these pensioners the redress that they have been seeking in the hope that we might honour the promise that was made to them.

Question put and agreed to.

Ordered,

That David Johnston, Andy Carter, Laura Farris, John Howell, Layla Moran, Stephen Crabb, Sir Paul Beresford, Patrick Grady, Chris Loder, Charlotte Nichols, Sir Geoffrey Clifton-Brown and Chris Green present the Bill.