Press release discussing problems for members of Turner and Newell pension scheme
by Dr. Ros Altmann
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40,000 T&N PENSIONS UNPROTECTED–GOVERNMENT ASSISTANCE INADEQUATE. PARLIAMENTARY OMBUDSMAN ASKED FOR HELP.
The Government has still failed to get to grips with the scale of the problems facing members of UK final salary pension schemes. There are now at least 40,000 extra people facing the loss of some or most of their pensions, in the T & N pension scheme. The US parent company is in administration and has refused to put in enough money to plug the deficit of its UK pension scheme. In fact, it went to the High Court to seek confirmation of this refusal, in order to protect company assets for ‘other’ creditors. This confirms the astonishing lack of protection offered by UK law for the rights of workers and former workers in company pension schemes, in the event of corporate failure or corporate restructuring. Despite the fact that pensions are deferred pay, pension rights do not take any precedence over other unsecured creditors. For T&N, this means that UK pension scheme members’ rights are being frozen in a scheme which is in severe deficit at the moment. The Administrator’s plan is to leave assets in the scheme and hope that rising equity markets and rising interest rates will reduce the liabilities over time. This is a huge gamble with people’s lives and, if it goes wrong, there is no safety net to protect UK members’ pensions. Short of some miraculous change in asset prices, it is virtually impossible to see how this scheme can avoid winding up, with insufficient assets to meet the liabilities.
Time and again, we have witnessed pension fund members’ rights being decimated, due to lack of protection in law. In other countries, there is already an insurance scheme in place to protect members in similar situations, but we have still not provided protection here.
These people cannot wait for the PPF next April, the Government must offer protection now. As a nation, surely we can’t just sit by and let this happen. How many more people’s lives have to be ruined by our pension system? How many more people’s savings have to be decimated? How many people’s promised pensions have to be snatched away without warning, while being told they were safe?
I am pressing ahead with my appeal to the Parliamentary Ombudsman, to try to persuade her to step in and ensure that this major social injustice is sorted out and that confidence in the UK occupational pension system can be restored.
It is also not clear whether these members would qualify for the £20 million a year Financial Assistance scheme which the Government announced in April. The DWP has said that people whose scheme starts to wind up after May 2004 will not be covered. Other groups are also planned to be excluded, such as those whose employer was solvent, but they have lost well over half their pensions. The T & N scheme members, if wind up happens now, are likely to lose around 60% of their pensions and pensioners would probably lose all their index linked increases.
£20 million a year for 20 years is nowhere near enough to sort out this problem. If T & N is included, we may need at least £75 million a year for 40 years. The Parliamentary Ombudsman should recommend proper compensation for the past and the Government should ensure that it moves more quickly to prevent this happening in future. Why not announce that members will be covered by the PPF now, but that the first year’s levy will be borne by members themselves – for example each member and pensioner of a company scheme should pay a one-off £20 or so, to be part of the PPF. Urgent action is long overdue.
Companies are struggling under the weight of pension liabilities and much higher contributions are needed to make up for underfunding. So far, employers are struggling to climb up the down-going escalator, and deficits are hardly shrinking, despite higher contributions and rising stock markets. Meanwhile members are trusting the system and then finding that their money has disappeared into the black hole of pension deficits. When will we all wake up and get to grips with the scale of this problem?