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Mineworkers' pensions

Published Wednesday, June 26, 2019

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 but in March 2003 said that, against the background of large falls in world stock markets, it would not be right to adjust the current 50/50 surplus-sharing arrangements (HC Deb 7 March 2003, cc 1278-9W).

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.”

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).

A Parliamentary Written Answer from November 2018 said the Government had received £4,438 million under the surplus sharing arrangements since 1994 and that the guarantee had enabled an investment strategy that had resulted in scheme members receiving payments 33% higher than their pension at privatisation:

Gloria De Piero: To ask the Secretary of State for Business, Energy and Industrial Strategy, how much money the Government has received from the Mineworkers' Pension Scheme (a) since 1994 and (b) in each of the last three financial years for which data is available.

Claire Perry: Since 1994, the Government has received £4,438.1m from the Mineworkers’ Pension Scheme. £3,127m of that is the Guarantor’s share of surpluses and £1,310.2m has been returned from the Investment Reserve. Receipts in each of the last three years were:

2016/7: £51m

2017/8: £51m

2018/9: £617.2m (£475m of which is from the Investment Reserve)

The Government guarantee has enabled an investment strategy that has resulted in scheme members receiving payments 33% higher than they would have been if they received only their actual earned pension up to privatisation. (PQ 190420 15 November 2018).

It had not been required to make direct payments to the scheme (PQ 190421 15 November 2018).

In April 2019, an open letter to the Chancellor of the Exchequer from MPs called for a review of the arrangements – with greater protection for scheme members’ bonuses as part of the guarantee and a larger share of the surplus to be returned to mineworkers.

In a response on 14 May 2019, Chief Secretary to the Treasury, Elizabeth Truss said the Government’s view was that the arrangements were fair and that “changes to the surplus sharing arrangements could only be considered in the round with changes to the guarantee, but Trustees have indicated that their members are happy with the guarantee as it stands.”

On 10 June 2019, BEIS Minister Andrew Stephenson said the Government was considering greater protection for bonuses already built up:

There are no current plans to review the existing arrangements, agreed between the Government and the Trustees in 1994, on the basis of the 1993 review. The scheme has been working well for all parties. The Government is considering proposals from the Trustees for changes including greater protection of bonuses that have already accrued (PQ260581, 11 June 2019).

In a Westminster Hall debate the same day, 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.”



Commons Briefing papers SN01189

Author: Djuna Thurley

Topics: Coal, Pensions

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