BMI Pension Fund Compensation

Graeme Morrice Excerpts

Wednesday 17th December 2014 Westminster Hall

[Graeme Morrice (Livingston) (Lab)]

Thank you, Mr Sanders, but it is pronounced “Morris”, although “Morreece” sounds quite posh. As always, it is a pleasure to serve under your chairmanship. I congratulate my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) on securing this important debate.

This issue remains unresolved, and it requires the Government’s attention. I hope that, through the debate, we can make progress for the sake of those affected. The plight of members of the British Midland Airways Ltd pension and life assurance scheme was first brought to my attention by a constituent, Mr Euen Harper of West Calder, who was a pilot. He worked hard over a number of years and conscientiously paid contributions into his pension, but he now faces a set of devastating consequences.

My constituent first expressed deep concern about the scheme back in 2012, when it was placed in the Pension Protection Fund following the decision to sell BMI to the International Airlines Group—a decision that, it should be noted, was between two fully solvent international corporations. That decision has had profound and adverse impacts on the expected pensions of the scheme’s 3,700 members, including those of current pensioners and widows, and it continues to have negative repercussions today.

The most significant of those is the tax treatment of the pension compensation fund offered by BMI’s parent company, Lufthansa. Members not only had to deal with losses to the pensions they worked so hard for, but face being penalised twice by HMRC’s decision to tax the compensation. Jim Snee, chairman of the BMI pensions action group, summarised the scenario that members find themselves in:

“We’ve lost £10, Lufthansa have offered £3 in compensation and HMRC want to tax us on even that small relief!”

The general secretary of the British Air Line Pilots Association, Jim McAuslan, also makes an important point when he refers to it as a double whammy. The decision has added yet another devastating setback to the members’ continuing struggle. I sympathise entirely with those affected and applaud the persistent campaigning of the pilots union and the BMI pensions action group. Indeed, without the action taken by such groups, and the efforts made by hon. Members present this morning, those affected would not have a political voice.

Before making my final point in this brief contribution, it is important to touch on some of the wider issues arising from the BMI pension scheme scandal. While I recognise that this debate is focused on the tax treatment element, the terrible situation faced by members highlights the need for a review of how failed pension schemes are dealt with. It is the view of my constituent and of the chairman of the BMI pensions action group that it is too easy for corporate companies to escape their pension responsibilities. Indeed, a similar situation is currently being experienced by members of the Monarch Airlines pension scheme after it was placed into the Pension Protection Fund this year. It appears that a dangerous precedent is emerging, as it is becoming more common for big corporate bodies to dump their pension scheme obligations. The Government and the Pensions Regulator must do more to ensure that companies cannot manoeuvre their pension scheme responsibilities to the Pension Protection Fund. It is simply wrong that hard-working, innocent members of pension schemes are penalised and that their employers can walk away.

What is evident from my constituent’s story, and that of many others across the country, is the unfairness of the whole situation. The unfairness is most evident among those long-serving members of staff who were due to receive more than £27,000 a year and have now lost 80% of their pension savings. The unfairness means that any chance that members had of receiving a reasonable form of compensation for their grievance has now been dashed. While the compensation offered by Lufthansa is welcome and the tax treatment of compensation for pension cases can be complex, the decision to subject the compensation offered to members of the BMI scheme to income tax is a further blow. It is for that reason that the Government must intervene to get justice for members of the scheme. I ask that BMI pension scheme members are granted the justice of tax-free compensation. I therefore call on the Government to use the powers available to apply discretion in this case. In the same way that the Government granted Equitable Life scheme members tax relief as it was considered the right thing to do, so the Government must do the same in this instance and disapply the rules in light of the treatment of those affected. At the very least, that is what the members of the scheme deserve. I look forward to the Minister’s response.

Finally, I again thank my hon. Friend for raising this important topic. For the sake of all affected, I hope that the matter is resolved speedily.