Covers the arrangements made for mineworkers' pensions following privatisation of British Coal in 1994.Jump to full report >>
On privatisation of British Coal in 1994, an arrangement was made between the Government and the trustees of the Mineworkers Pension Scheme (MPS) on future arrangements for pensions from these schemes after privatisation. Key elements were that the Government would guarantee that any pension earned up to privatisation would not fall in cash terms. If at subsequent valuations, the scheme was in surplus, this would be shared 50/50 between scheme members and the Government. The members’ share would be used to fund bonus enhancements over and above annual indexation (HC Deb 27 April 1994 c167-9W). The decision to share the surplus 50:50 was “agreed between the Government, in its role as Guarantor, and the Scheme Trustees,” rather than being based on actuarial advice (PQ128727, 26 February 2018). The National Audit Office said the guarantee would be of significant reassurance to pensioners (HC 360 1995-96).
In the 2000s, the Coalfield Communities Campaign argued for a review of the surplus-sharing arrangements, arguing that the guarantee had been struck on actuarial advice which, with hindsight, may have been too cautious and that a “50% share of an unexpectedly large surplus is too much.” The Labour Government looked again at the arrangements but decided that, against the background of large falls in stock markets, it would not be right to change the arrangements (HC Deb 7 March 2003, cc 1278-9W).
The campaign for a review of the surplus sharing arrangement has continued. In 2017, the Conservative Government responded that all parties to the agreement had believed it fair at the time. The payments that had been made to the Government reflected the guarantee (which enabled greater investment risk to be taken) but also the contributions it had made to the scheme in the past (HC Deb 5 December 2017 c317WH).
In April 2019, an open letter to the Chancellor of the Exchequer from MPs called for greater protection for scheme members’ bonuses and a larger share of the surplus to be returned to mineworkers. In a Westminster Hall debate on 10 June 2019, the House agreed to a backbench motion calling on the Government to “carry out a review of the existing arrangements for the sharing of the surplus generated by the Mineworkers’ Pension Scheme.”
In July 2019, the MPS trustees wrote to scheme members saying they had got support from the Energy Minister for a proposal for greater protection of existing bonuses. They said that, while a change in the surplus share would be welcome, it would only lead to bonuses for members if investment returns were strong, requiring a riskier investment strategy. Bonuses would not be protected. In November, the trustees announced that the Government had accepted their proposals and that work was underway to implement them. (See also, PQ 1709, 15 January 2020).
The Labour Party’s manifesto for the 2019 general election included a commitment to reduce to 10% the share of the surplus going to the Government. Press reports of a visit to Nottinghamshire during the election campaign, said Prime Minister, Boris Johnson, had “made a ‘categorical’ pledge that miners will soon receive their fair share of the Mineworkers' Pension Scheme.”