PMI Opinion Piece on Judicial Review verdict against Government
by Dr. Ros Altmann
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The scandal surrounding over 100,000 members of failed final salary pension schemes who have lost some or all of their occupational pension – and even some of their state pension too – continues to drag on. Despite the recent High Court Judicial Review ruling that rejection of the Parliamentary Ombudsman’s report was unlawful, these people are still struggling without their pensions. This issue has been cited in numerous surveys as a major cause of the dramatic decline in pensions confidence in the UK. The Government’s attitude is shameful and heartless. I am asking PMI members to please contact their MPs and ask them to support compensation to settle this issue properly.
FOURTH GUILTY VERDICT AGAINST THE GOVERNMENT
Over a year ago, the Parliamentary Ombudsman found the Government guilty of misleading members about the security of their pensions. She recommended that the Government should consider fully compensating for their losses and also for the stress and distress they have endured. Ministers tossed the Ombudsman’s verdict aside and insisted she had got it all wrong!
A few months later, the Parliamentary Public Administration Select Committee investigated this unprecedented rejection of a Parliamentary Ombudsman’s report and concluded that the Ombudsman had been correct, the Government was certainly guilty of maladministration and that its behaviour had been ‘at best naïve and at worst misleading’. The Committee also called for proper compensation, but once again, the Government insisted it had done absolutely nothing wrong and rejected this report too.
Then the European Court of Justice ruled that UK Governments had broken EU law, by failing to protect workers’ pensions, which contravened the 1980 EU Insolvency Directive.
Now the High Court has ruled the Government’s rejection of the Parliamentary Ombudsman’s findings was unlawful. In a landmark Judicial Review case brought by four claimants representing all those who have lost pensions when their schemes wound up (whether with a solvent or insolvent employer), Mr. Justice Bean confirmed that the Government must accept it is guilty of maladministration, that the Ombudsman’s findings are binding, that the official public pensions information misled people and that ‘no reasonable secretary of state could rationally disagree with that view’.
Four victories for the victims but still no contrition from Ministers.
TRUST IN PENSIONS AND POLITICIANS HAS BEEN UNDERMINED
How can people ever trust any Government’s word on pensions if this scandal is left unremedied? Particularly in light of past statements made by current Labour leaders.
For example, after the Parliamentary Ombudsman found the previous Government guilty of misleading the public over inherited SERPS state pensions, Labour promised to ensure all official pension information in future would be reliable, accurate and comprehensive. In 2000, Alistair Darling, then Secretary of State, said: ‘There is a clear responsibility to ensure that the information that Departments provide is accurate and complete. In this case, it was not. Furthermore, even the serious implications of giving the wrong information were not appreciated by the Department. That should never have happened.’
’As a matter of principle, when someone loses out because they were given the wrong information by a Department, they are entitled to expect the Government to put it right’.
‘We shall also provide redress for those people who were wrongly informed and who, had they known the true position, might have made different arrangements’.
Perhaps even more pertinently, another Labour MP said:
“I must ask why we have to rely on the Parliamentary Ombudsman to confirm the Government’s mismanagement, maladministration and incompetence.” This same MP railed against the “the fecklessness, gullibility and incompetence of the Government, which for months and years ignored all warnings” . Which MP was this? None other than Gordon Brown, in 1989. shadow Industry Minister, after the Conservative Government agreed to compensate people who had lost out in the Barlow Clowes pension scandal. Yet now, when his own Government’s actions on pensions are found wanting, he has stayed completely silent on the question of compensation.
The Government has caused tremendous hardship and suffering to tens of thousands of innocent people, many of whose lives are in ruins because they were relying on a secure retirement from their employer’s pension scheme. They were consistently told, after 1995, that their pensions were ring-fenced and ‘guaranteed’.
GOVERNMENT MIS-SOLD THESE PENSIONS AND MUST COMPENSATE
The Government has tried to belittle this situation and pretend that it is just about a couple of leaflets which hardly anybody actually read and which nobody could possibly have believed to represent the full picture of the safety of their final salary pension.
This issue is not just about a couple of leaflets. This is about a sustained campaign of misinformation, which lulled the public into a false sense of security. The official material, described as providing ‘impartial’ information, was clearly designed to encourage people to contribute to these schemes. That was Government policy and failing to alert them to the true risks amounts of official mis-selling. In any other sphere, those who encourage people to put money into a product and provide information which talks only of the benefits and not the risks, would have to fully compensate for any losses. If the financial services Ombudsman finds someone guilty and recommends compensation, they cannot simply say they ‘disagree’ and refuse to pay.
Yet here we have the Government trying to over-ride all our constitutional safeguards and be its own judge and jury. This is the slippery slope to dictatorship. It simply cannot be right for Governments to make rules for others, but feel those same rules need not apply to itself.
The Government has tried to claim this scandal is everyone else’s fault and that it has done absolutely nothing wrong. It says nobody should have relied on the public information it produced. However, at the time, it told the public that these were official ‘guides’ to the pension system, which would explain pensions from a source people could trust and help them consider what questions they needed to ask. Sadly, they left out the most important question – i.e. ‘what would happen to my pension if my scheme wound up?’
The Government has also tried to claim that it did not cause the schemes to wind up, therefore it is not responsible for what happened. But, the problem is not that the schemes wound up. Everyone knows that can happen. The problem is that the Government said these pensions were safe even if the scheme did wind up. In other countries, these pensions were properly protected – the official funding regime in Eire worked properly and members of winding-up schemes received their full pensions. However, even after being warned that members and trustees were unaware of the risks that even ‘fully funded’ schemes (on the Government’s official funding measure) may not have enough money to pay members’ full pensions, official material continued to provide unqualified reassurances of safety and protection.
GOVERNMENT INCOMPETENCE ON PENSIONS POLICY
One has to ask whether those in charge of the DWP actually understand what they are doing! When it comes to pensions, this government has made such a mess of so many areas.
If the DWP knew that members’ pensions were not really safe, it should not have indicated they were. By providing this reassurance, members were denied any chance to protect their retirement income. The Government should have realised – at the time – that these members would be relying on their pensions and that there was a danger that members who did not receive their pensions on scheme wind-up would have no option but to look to the Government to provide the pensions promised by the employer and endorsed by the official information. It is not up to the public to second-guess what the official literature means – especially when it is awarded a crystal mark for plain English! Those who produced the pension guides should have thought through the implications of false reassurances of safety without warning of the risks. The readers could not do so, because by definition they were not aware of those risks!
The bottom line is that, sooner or later, the Government will have to organise a proper rescue scheme to sort this out. The longer it delays, the worse the problem becomes.
COSTS OF COMPENSATION GROSSLY EXAGGERATED
Disgracefully, the costs of compensation have been deliberately exaggerated. It would cost about £100m a year, on average, for 50 or 60 years, which, for example, is far less than the annual cost of official errors in benefit payments by the DWP. This sum is easily affordable.
The Government claims that the Financial Assistance Scheme (FAS) is helping those in most urgent need. That is not true. In fact, the FAS is little more than political spin. Of the 10,000 victims already past pension age, less than 1,000 have received a penny so far. The Government says it has set aside over £2billion for the FAS. That is simply not true. So far, just £3m has been paid out to victims (while over £7m has been spent on administering the scheme!) The Treasury has not put any money in at all and the scheme has not delivered. Yet the costs of a proper rescue scheme are not that high.
Even without taxpayer funding, there are assets available in the failed pension funds themselves, which can be used to pay pensions immediately, rather wasting them on buying annuities. There are also large sums potentially available in orphan assets in life and pension companies, as well as unclaimed assets in banks and building societies. These assets should be used to establish a Pension Restoration Fund for the victims of this dreadful scandal. Only the Government can organise this. It should take on this responsibility immediately, no more delays, no more fighting, let’s just sort this out and allow these people to get on with their lives.
MPs HAVE THE POWER TO RIGHT THIS WRONG – IT IS A NATIONAL SCANDAL
If you believe the Government should properly compensate, please write to your MP and demand action. What is the point of having a Parliamentary Ombudsman if her views can be over-ridden? The future of pensions and of our democracy demand action now.