Pension wind-ups scandal worse than Maxwell
by Dr. Ros Altmann
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Government’s dismissal of the Parliamentary Ombudsman’s findings is unbelievable. Government misled the public into believing their pensions were safe, when it knew they weren’t. It decided not to warn them, which was negligent. Members have proved to the Ombudsman that they were lulled into a false sense of security, and she also found they were damaged by careless policy decisions and have lost their pensions as a result.
They were denied any chance to protect themselves, because they had no idea they needed to.
Legislation designed to make pensions safe after Maxwell failed. Although the 1998 Green Paper said ‘the concept behind the MFR is that… people who have built up pension rights should be able to draw their pension in full, even if the employer is no longer there’, the Parliamentary Ombudsman discovered that, behind the scenes, Government only intended MFR should give workers a 50/50 chance of full pensions if their scheme failed. As annuity rates soared, the actual protection on wind-up dropped dramatically further. The actuarial profession warned Government that members should be told. Government ignored this.
Official pension information guides, designed to help people understand the benefits and risks of pensions ‘from a source they could trust’, never mentioned the single biggest risk to final salary pensions. Nor did they tell the public they must take financial advice. Alistair Darling said ‘The public rely on Government information and they are entitled to be reassured that leaflets are accurate and comprehensive’. Malcolm Wicks told Parliament ‘we are aware of the importance of protecting members’ rights. If we cannot do that, they have no-one else to look to’. Yet, members who trusted Government assurances that their pensions were safe have ended up losing everything. If they had known the true risks, they would have had a chance to protect their position. Even with Maxwell, the 32,000 workers got their pensions back. This scandal is far worse and Government must pay the £150million or so a year. Our Parliamentary democracy demands nothing less.