Pension Protection Fund

Glyn Davies Excerpts

Tuesday 22nd November 2011 Westminster Hall

[Jonathan Evans]

I apologise for failing to mention the hon. Member for Newport West (Paul Flynn). He regularly attends all such debates. I had presumed that he was present for the previous debate on Colombia, without realising that he also wished to contribute to this one. I am happy to put the record straight on that and to give credit to the right hon. Member for Dwyfor Meirionnydd and his colleague, the hon. Member for Arfon, for their support for the ASW workers.

[Glyn Davies (Montgomeryshire) (Con)]

Following on from the intervention of the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd), many years ago, I met groups of people from ASW outside the National Assembly for Wales when they were explaining their case to Assembly Members. If we are going to have a successful pensions industry to which people are willing to contribute, we cannot let these things drift on for decades. This is not the only case, and I congratulate my hon. Friend on highlighting the issue.

[Jonathan Evans]

I am grateful to my hon. Friend for that point and shall now endeavour to make some progress.

Ros Altmann’s letter continued:

“Literature from the government, the Financial Services Authority, the Occupational Pensions Regulatory Authority and everyone else contrasted the safety of final salary schemes with money purchase arrangements, where members’ pensions were not guaranteed”,

as we see from what happens on the stock market almost daily. That was the guarantee that ASW workers believed they had right up until July 2002, when the company went into liquidation. It was then that John Benson and his colleagues discovered that, despite years of parliamentary inquiry, debate and legislation on pensions, they were no better off than the MGN staff, whose pensions had been stolen. As Ros Altmann put it at the time:

“Simply to say it is a tragedy that thousands of people have had their pension expectations reduced is an insult to those who have suffered in this way. This is not an example of life’s unfairness; this is more like fraud. Other victims of mis-selling receive compensation. Having contributed their money loyally for 30 or 40 years, with the promise of a secure pension and no risk warning from anyone, many now find not that they will get a reduced pension but that they will get no pension at all.”

She went on to say that

“they would in fact have been better off throwing their contributions away, than putting them into their employer’s schemes. Is it any wonder that people are frightened of pensions and have lost confidence?”

The ASW scandal provoked a major campaign, which, as my hon. Friend has mentioned, began during his time at the Welsh Assembly. There was a call for action in this House and the workers were invited to No. 10 Downing street for tea and sympathy with Tony Blair, but more practical help was demanded by others in the House. I pay credit to the hon. Member for Cardiff West in that regard—he was certainly active on behalf of the pensioners—and to my good friend, the former Member for Eastbourne, Nigel Waterson, who played a leading role in supporting the workers and in highlighting the injustice of the situation. The Minister himself was also active and supportive in that debate. The campaign led to the establishment of the financial assistance scheme under the Pensions Act 2004.

At the time that the scheme was put in place, many believed that the outcome would guarantee 90% of expected pensions benefits for affected workers. I have read the parliamentary debates in which many members of the then Government expressed the joy with which workers would greet the news that 90% of their entitlements were safeguarded. Unfortunately, they were sold a line that was both simplistic and inaccurate.

Although schemes such as that for ASW provided up to 5% inflation proofing, the legislation cut it to 2.5%, less than half of the current level of inflation. Over time, that still further erodes the pension value and is further cut by the switch from RPI to CPI, which the Minister has also applied to the financial assistance scheme.

In parliamentary questions on 29 June 2009, one Member rightly exposed that deceit, although he was too courteous to suggest that the deception was in any way deliberate. He said:

“Does she”—

the then Secretary of State—

“accept that this 90 per cent. figure that she uses is highly misleading…because it is not just capped…there are big issues about the inflation protection? Does she accept that many pensioners will get much less than 90 per cent., and that over the years they will see annual falls in their real pensions? Will she look at those cases again?”—[Official Report, 29 June 2009; Vol. 495, c. 6.]

Of course, the hon. Member who was able to identify all those shortcomings is now the Minister himself. Let me make it clear that I am a strong admirer of the Minister. I believe that he is personally motivated to do all he can to help these cheated pensioners. I know that since the election he has met, on more than one occasion, with the ASW pensioners to examine any ways their plight can be alleviated. We are all aware of the difficult financial circumstances that the Government face. Nevertheless, Mr Benson and my constituents have pointed out to me that, in the run-up to the general election, both coalition parties heavily criticised the previous Labour Government for the shortcomings of this scheme. It was, therefore, a reasonable inference for them to draw that some action might be taken to address these failings if we were successful in the election.