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Mineworkers' pensions

Published Thursday, July 26, 2018

Covers the arrangements made for mineworkers' pensions following privatisation of British Coal in 1994.

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On privatisation of British Coal in 1994, an arrangement was made between the Government and the trustees of the British Coal pension schemes - the Mineworkers Pension Scheme (MPS) and the British Coal Staff Superannuation Scheme (BCSSS) - 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. The schemes would be subject to periodic valuations. If there was a surplus, this would be shared 50/50 between scheme members and the Government. The members’ share of any surplus 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).

A 1995/96 National Audit Office (NAO) report noted that 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. It said a “50% share of an unexpectedly large surplus is too much.”

The Labour Government did agree to look at the arrangements again. However, in March 2003, it said that, against the background of large falls in world stock markets, it did not think it would be right to adjust the current 50/50 surplus sharing arrangements. (HC Deb 7 March 2003, cc 1278-9W).  In 2008, it said the equal division of the periodic surpluses was “a fundamental element of the arrangements established in 1994 whereby the Government provides an insolvency guarantee to the scheme.” In addition, the arrangements were “not time limited” (HC Deb, 22 Feb 2008, c1032W).

An ongoing campaign is calling for the 50/50 split of the surplus to be renegotiated to reflect a “more realistic percentage which reflects the guarantors’ risk and recover all monies that rightly belong to the mineworkers of the UK.” The Labour Party manifesto for the 2017 election included a commitment to an immediate review of the surplus-sharing arrangements. An EDM in the name of Grahame Morris calls on the Government to negotiate with the trustees to reach a “fairer surplus sharing agreement to benefit former mineworkers.”

Asked whether it would reform the MPS to ensure the surplus is used to benefit former miners, it “would be willing to consider proposals put forward by the Scheme Trustees.” (PQ46740 12 October 2016). A PQ as to what representations it has received from the Trustees has not yet been answered (PQ 6201, 19 July 2016). They say they have “asked the Government to re-consider the terms of the Guarantee, including the surplus sharing arrangements, on a number of occasions.” (MPS website/history of the scheme).

An EDM in the name of Grahame Morris calls on the Government to negotiate with the trustees to reach a “fairer surplus sharing agreement to benefit former mineworkers”.

In a Westminster Hall debate on 5 December 2017, Nick Smith called for a review, arguing that the miners had earned it and deserved a better and fairer share of it. The then Energy Minister Richard Harrington 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 had enabled greater investment risk to be taken) but also the contributions that it had made to the scheme in the past  (HC Deb 5 December 2017 c317WH; see also, PQ 47614 21 October 2016).

The results of the 2017 valuation showed the scheme to have a large surplus (just over £1.2 billion) in the Guaranteed Fund. Half of this would be used to provide bonuses for members - equivalent to 4.2% of guaranteed pensions in each of the next six years. The other half would be transferred to the Government over ten years. The Government would also receive a payment from the Investment Reserve by September (MPS, Results of the 2017 valuation; MPS Pensions Newsline, Summer 2018).

On 25 July 2018, BEIS Minister Claire Perry said she had asked officials “to explore work with the Trustees to explore options for revising the scheme for the benefit of all parties” (PQ 164474, 25 July 2018

 

Commons Briefing papers SN01189

Author: Djuna Thurley

Topics: Coal, Pensions

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