Global Pensions magazine article on Judicial Review verdict

by Dr. Ros Altmann

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On 21st February 2007, following a three-day Judicial Review hearing in the High Court, Mr. Justice Bean delivered his exceptionally quick and damning verdict that the UK Government’s unprecedented rejection of its own Parliamentary Ombudsman’s Report, was unlawful.  In March 2006, this Report highlighted how successive Governments had misled members of company pension schemes into believing their pensions were completely safe, when this was not actually true. 

This is the worst scandal ever to hit UK pensions.  The Government has consistently refused to take responsibility for putting right the problems created by its policy of encouraging people to put their money into their employer’s final salary pension scheme, reassuring them their pensions were completely safe ‘whatever happened to their employer’ and denying them any chance to protect themselves from losing their entire occupational pension when their scheme wound up.  Protections in other countries, such as Eire, did work, but those in the UK were allowed to weaken so much that over 100,000 people lost their entire pension, while being assured by official information that their pension money was protected.

Now, the High Court has confirmed the findings of the Parliamentary Ombudsman and Parliamentary Public Administration Select Committee, that the official information produced since 1996, was inaccurate and misleading and that ‘no reasonable Secretary of State could rationally disagree’ with that conclusion. 

The judge directed the Government to accept that it is guilty of misleading scheme members and to reconsider its rejection of the Ombudsman’s recommendation to compensate all those who may have suffered as a result.  The Government was also ordered to pay both sides’ costs, having previously refused to lift its threat of bankrupting the claimants by pursuing them for its legal costs if they lost the case.

Disgracefully, despite its defeat, the Government’s immediate reaction was to consider appealing against the verdict, making those who are struggling without their pensions wait even longer for justice. 

It has tried to hide behind the spin of the so-called Financial Assistance Scheme (FAS) – which has been an abject failure.  Nearly three years after the scheme was announced in 2004, only a few hundred of the ten thousand victims already past pension age have received a penny of help.  Most of these pensioners are struggling without the occupational pension they contributed to for decades.  They have also lost some of their state pension which had been contracted out into the employers’ scheme. 

Administration of the FAS has cost the taxpayer £7million so far, while having paid out just £3million of assistance!  MPs were hoodwinked into believing that a sum of £2.3billion has been put into this FAS.  This is a statistically nonsensical ‘cash cost’ (a measure that Government never uses for reporting long-term spending) and takes no account of tax paid on the assistance and means-tested benefits not paid to recipients.  The net cost, over 60 years, will be more like £600million, but the money is not getting through now – many victims are in desperate straits, some have even committed suicide waiting for help.  While the Government claims it cares and has helped, the suffering continues!  In fact, the Treasury has not put any money aside at all for the FAS.   The payments have had to come from the existing DWP budget.  Hardly surprising, then, that so few people have been helped. 

After the unequivocal Judicial Review verdict, I believe we may be close to a resolution of this dreadful scandal – a scandal of the Government’s own making.  How much longer can Ministers deny their guilt, when all independent verdicts have said they misled members so dreadfully?  It is sad that this case ever needed to be brought at all.  Indeed, we may need a backbench rebellion by Labour MPs to force the Government to act, but I hope it will not be too much longer before these innocent victims, whose lives have been ruined by trusting our pension system, finally achieve the justice they deserve.


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