AEA Pension Scheme

Lord Vaizey of Didcot Excerpts

Wednesday 26th October 2016 Westminster Hall

[Mr Edward Vaizey (Wantage) (Con)]

I am grateful for the opportunity to participate in this debate, Ms Dorries. I have never had such an immediate effect on my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and I relish the moment. I think I missed the announcement about a third runway in west Dorset. I am slightly disconcerted to see him wearing a red jumper and sitting on the Labour Benches. I hope he will return to the Government side of the House as soon as possible.

I praise my right hon. Friend for calling this important debate on the plight of pensioners in the AEA Technology scheme. There are many in my constituency and, as he rightly pointed out, there was an important debate on the subject a year ago in this Chamber. This is the second debate. The number of hon. Members, not just those here today, but those who took part in that debate, shows how widespread the concern is in the House. Around 3,000 pensioners are affected and although at the moment some have lost about 10% of their pension, the cumulative impact for many of them will be that their pensions decline by between 30% and 50%.

At the heart of what is a clear injustice is that it is as plain as a pikestaff that my constituents were misled 20 years ago in the advice they were given about whether to retain their accrued benefits in what was effectively a Government pension scheme, or whether to transfer them to a private scheme. As my right hon. Friend said, the advice given to them in 1996 was that the private sector scheme would be no less favourable than the public sector scheme.

My constituent, Derek Whitmell, has been assiduous in digging out information from various organs of Government. He has a letter from the Government Actuary’s Department dated 14 November 2014 which states:

“We have found no specific record on file of the underlying justification for the statement that ‘it is unlikely that the benefit promise made by either the UKAEA scheme or the AEAT scheme would ever be broken.’”

My constituents were told that a transfer would not be detrimental to them, and that it was unlikely that being in the private sector scheme would have any impact on them, yet the then Pensions Minister, Steve Webb, when responding to the debate a year ago, put forward various hypotheses and said:

“Let us suppose the trustees of a hypothetical privatised new scheme invested recklessly and generated a huge deficit, resulting in insolvency. Would the taxpayer be responsible for the trustees’ actions?” Similarly, if investment returns went badly for that private company or other private companies, would the taxpayer be indefinitely on the hook for any deficit?”—[Official Report, 18 March 2015; Vol. 594, c. 289WH.]

I am not saying the Government should be responsible for the investment decisions of AEA Technology, but the very fact that such risks were hidden from my constituents says something.

My right hon. Friend referred to the drafting of the original advice in the 1990s. Again thanks to FOI requests from my constituent, Derek Whitmell, we have seen what emerged. One paragraph that my right hon. Friend did not quote but is very telling comes from AEA Technology. It states:

“We believe the general tone of this note is likely to discourage people from transferring to the AEAT scheme”—

the private scheme—

“while recognising that the note must be as neutral as possible we do not think this is the case and have suggested a few places where the tone could be modified. In section 3”

which my right hon. Friend referred to,

“we would like to see the advantages of transferring put before those for preserving.”

In plain English, to me that means, “Slant the advice to encourage people to transfer.” That is why 90% of pensioners transferred to that scheme.

I will be as brief as possible because I know the wind-ups are about to begin. We have been pushed from pillar to post. I went to the Secretary of State for Work and Pensions and the Pensions Minister before the last election. I went to the then Secretary of State for Business, Innovation and Skills and was told to go to the ombudsman. A full complaint was made to the ombudsman, who decided not to take any action. A case worker in the Parliamentary and Health Service Ombudsman’s office, Oliver Forrester, wrote back—he has since moved on and there is no one to talk to—and stated:

“By law, we cannot investigate complaints about superannuation (including public sector pensions) in relation to employment under any authority to which our legislation applies…Nor can we look at service in any office of employment or any contract for services…As this complaint is wholly regarding the advice you were given by these two organisations about your pension options, unfortunately, we are legally barred from looking at it further.”

I am not sure I agree with that, but I note what my right hon. Friend the Member for West Dorset says: in any event, there is scope to amend the law in order to have clarity.

At the heart of this is a plain and simple fact: my constituents and those of other right hon. and hon. Members were clearly misled in the advice that they were given. They were in effect given cast-iron assurances that their pension would be as secure in a private pension scheme—the accrued Government pension, I hasten to add. We are not arguing about the private pension from the moment they became employees of a private company. They were told that the accrued Government pension would be as secure when it was transferred to a private pension scheme. None of the risks was flagged up to them. As my right hon. Friend the Member for West Dorset said, these are highly professional men and women, working in a very skilled environment. There seems to be absolutely no redress for them from Government—no willingness from anyone in Government to take on board what has happened and to have a reasonable, intelligent and thoughtful conversation about how we can right what is clearly a wrong.

I welcome the new Pensions Minister to his post. He has an unparalleled reputation in the House. I will now sit down, hear what the Opposition have to say and look forward to the Minister’s remarks.

--- Later in debate ---

[Richard Harrington]

I really think I should make progress.

As for the pensions ombudsman, which I have some responsibility for and some knowledge about, members of a pension scheme can complain to the pensions ombudsman, who has the power to investigate, and does investigate, public sector pensions schemes as well as private sector schemes.

The pensions ombudsman looks at maladministration —for example, when a trustee or a manager has been given incorrect advice or information. The previous pensions ombudsman investigated a complaint last year concerning the AEA Technology pension scheme. GAD was not a party to that complaint. In the determination, the ombudsman specifically said that he was not ruling on whether the actions of GAD came under his jurisdiction and that no inference should be drawn from his comments about whether it did or did not, or about the likelihood of a successful complaint about GAD.

I understand that the current ombudsman has since considered some AEA complaints and the ombudsman’s office has decided not to investigate. I cannot comment on any particular complaint, but I have been informed that, in accordance with the usual procedures, all the complaints were looked at individually. Many reasons for not investigating the complaint were given, but they did not include that GAD was outside the pensions ombudsman’s remit.

It is possible, of course, to challenge the pensions ombudsman’s decision through the courts by judicial review or by appeal. I would briefly like to mention the Equitable Life case, which has been discussed during the debate. The parliamentary ombudsman did an investigation and asked the Government to expand the jurisdiction for this case alone. She informed us that public sector pensions are beyond her remit, so it seems to me that it is in the pensions ombudsman’s remit. He has looked at these two cases but has said that GAD was not a party. As far as I can see, however, there is nothing to stop people from going to the pensions ombudsman and naming GAD as a party to the case. If they are still not satisfied, there is the system of judicial review in the Court of Appeal, because the pensions ombudsman is a quasi-judicial body. I meet the pensions ombudsman regularly, and I am prepared to bring the subject up straightaway and ask whether he has difficulties within the scope of his existing jurisdiction in dealing with complaints brought to him.

[Mr Vaizey]

Will the Minister give way?

[Richard Harrington]

I am afraid there is not time. I am really sorry, but I only have three minutes left.

The Government have announced their intention to bring forward a draft Bill to create a new public service ombudsman, the focus of which remains the resolution of complaints from individual citizens who claim to have suffered injustice. The response to the consultation said that the ombudsman should operate a “no wrong door” approach, which is referring individuals and possibly transferring their complaints when they fall wholly or partially within the jurisdiction of another body. As for whether GAD should be included in its remit, the Government’s commitment at the moment is that it should take on just the jurisdiction of the parliamentary, health service and local government ombudsmen, but if right hon. and hon. Members believe—as my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) does—that there will be gaps, the Government are willing to listen to their concerns. After I found out about this debate, I spoke at some length with the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Kingswood (Chris Skidmore), and he would be pleased to meet my right hon. Friend the Member for West Dorset to discuss this and other relevant issues.

I realise, Ms Dorries, that you are about to tell me that my time is up. I am sorry that I do not have more time to go into details, but I hope that I have given some indication of the Government’s thinking.