Ignoring the Ombudsman – Government worse than Maxwell – Ros Altmann

    Ros is a leading authority on both private and state pensions,annuities and
    retirement policy. Numerous major awards have recognised her work to
    demystify finance and make pensions work better for people.

  • Ros Altmann

    Ros Altmann

    Ignoring the Ombudsman – Government worse than Maxwell

    Ignoring the Ombudsman – Government worse than Maxwell

    Ignoring the Ombudsman – Government worse than Maxwell

    by Dr. Ros Altmann

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    The Government has recently been found responsible – by the Parliamentary Ombudsman and the Parliamentary Public Administration Select Committee (PASC) – for the biggest pension scandal in our history.  I am one of over 100,000 people who have lost our pensions when our company scheme wound-up – despite Government assurances that our money was safe.  The recent pension reform proposals aim to encourage people to contribute to pensions.  We did that for years and have ended up with nothing.

    Government lulled everyone into a false sense of security after the Maxwell scandal. We were told that new laws, from 1997, would provide proper protection.   In fact, these laws created significant new risks, which had not been there before.  On wind-up, trustees no longer had discretion to divide scheme assets fairly and the law directed all scheme assets to those already drawing pensions, leaving long-serving members with no pension at all.   This would not have happened before 1997.  Even protections for contracted out pensions were removed on wind-up, although these were replacing state pension rights. Government said we would get a ‘Guaranteed Minimum Pension’ (GMP), but this turned out to be neither ‘guaranteed’ nor ‘minimum’.  Most of us are now worse off than if we had never put a penny into our company scheme at all, and had no opportunity to try and protect our pensions. Government said new rules would ensure schemes would have enough money to pay pensions to all members, whatever happened to the employer.  However, in reality, these minimum funding standards (MFR) were only designed to give a 50/50 chance of workers getting full pensions on wind-up, but this was kept secret. 

    The new laws put in to protect people after Maxwell have actually created a scandal far worse than Maxwell itself, and one which Government is directly responsible for.  Within a few weeks of Maxwell falling off his boat, Government organised a rescue scheme for the 32,000 pensioners in his 8 schemes.  No-one lost their state pension rights and a trust fund provided interim pension payments for all those reaching their scheme pension age.  Yet, in this scandal, over 100,000 people have been left with nothing and Government has refused to compensate, just offering an ‘assistance’ scheme which, after years of waiting, will only pay a partial pension from age 65, even if scheme pension age was 60.

    How does Government expect to restore confidence in pensions if it fails to compensate us properly?

    Government does not deny encouraging people to join these schemes, and that its leaflets failed to mention the huge risks to members’ pensions on wind-up.  It admits the actuarial profession, in 1999, informed Ministers that members, employers and trustees all mistakenly believed the MFR would fully protect their pensions and they should be properly informed of the risks they faced.  It also admits that even after this, it did not revise any of its official ‘educational’ information to mention the possible risks of wind-up.  The Parliamentary Ombudsman and the PASC unequivocally found that all this amounts to clear maladministration, but the Government has refused to accept it did anything wrong, using an amazing catalogue of excuses to justify this.

    Firstly, it says no-one should have relied on the official information (why was so much money spent on producing it then?)  Secondly, it says no-one could have been misled by reading this material (even though Ministers have actually met plenty of us who were).  Thirdly, it says its materials were only ‘general guides’ (that is why we were ‘guided’ by them).  Fourthly, the leaflets had tiny disclaimers which said they were not a complete statement of the law (well, we would not have expected them to be a complete statement, but would never have dreamed they could be so incomplete as to leave out the biggest risk).  Fifthly, Government says it was up to trustees to warn members of the risks (but remember these were risks that the Government itself had created, of which it had special knowledge that it decided not to share with the public and which it had been told in 1999 trustees were unaware of.  Indeed the Regulator issued incorrect information to trustees too).  Finally, the Government says it is not clear whether it had any legal duty to protect pensions anyway.

    Whether or not Government was obliged to protect pensions is not directly relevant to this scandal.  The main issue is that Government created risks, decided to inform us about the situation, but left us unaware that our pensions were not actually safe, thus denying us any chance to protect ourselves from an impoverished retirement.  We played by the rules, saved for decades and trusted what we were told by Government.  If Government had said nothing, we would not have believed our pensions were safe.  Furthermore, although the original policy intention of the MFR was to ensure sufficient funds to meet all pension liabilities if the scheme wound up, Government weakened the MFR twice and ignored the consequences of this for members’ pensions on wind-up.  

    We have suffered so much, not because our employer failed, but because of a sustained campaign of Government misinformation, inadequate oversight of funding standards and unfair Government rules on wind-up, which we were never told about.  If we had known the risks, some of us could have retired and secured our pensions, some could have transferred out or negotiated higher employer contributions.  Most of us have completely wasted our additional voluntary contributions. 

    Government’s claims to have done nothing wrong are shameful and destroying the credibility of both pensions and the Government itself.  What is the point of having a Parliamentary Ombudsman if Ministers can just ignore her findings?  This is a constitutional challenge and we must not let Government escape its obligations.

    The recent pensions White Paper aims to encourage people to take personal responsibility for their retirement income.  Unless government compensates people who did just that, believed the Government’s words and were let down so dreadfully by changes in the law that were supposed to protect them, who will believe anything Government says about pensions in future?

    Peter Humphrey
    Former Dexion scheme member
    Pensions Action Group

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