Sandra Osborne

Labour Party | Ayr, Carrick & Cumnock

Fair enough ... but good enough?

The Pensions Bill was announced in the Queen's Speech as a key part of the government's programme A Future Fair For All. And although it is a Bill that fits the bill in many respects, there is a key area where it is lacking.

It fails to offer a fair future for the thousands of employees of companies which have gone into liquidation with under-funded pension schemes. These now face the prospect of being substantially deprived of the pensions they have paid into all their working lives.

Most people think their occupational pension is safe. After all, the Financial Services Authority, the National Association of Pension Funds and the Office of Pensions Advisory Service all recommend joining a pension scheme.

But as employees of United Engineering Forgings (UEF), Melville Dundas, Dexion, ASW, Kalamazoo, Ravenhead Glass, Blyth & Blyth, Lister Yarns and many more have discovered it is possible to work for 40 years, pay-in to a company pension scheme yet get nothing back, not even your contributions, upon retirement.

The 1995 Pensions Act attempted to direct what should happen to the assets of pension schemes in the case of insolvency. Existing pensioners get their pension in full, indexed against inflation. Employees get what is left, which often amounts to little or nothing. This seemed okay while annuity rates were over 10%, the stock market was booming and many pension funds were in surplus. Since 2000 the stock market has fallen and annuity rates plummeted to under 4%. This has resulted in pension disaster for thousands of employees whose employers have gone bust. Not only were these victims not warned of the risk – they were positively encouraged to rely on company pension schemes.

The government's proposed Pensions Bill will introduce a new Pension Protection Fund which will end the scandal of workers being denied their pensions built up over many years just because their company goes bust.

It will also strengthen pension protection for employees who find themselves transferred to a new employer to ensure firms can't use takeover as an excuse to scrap pension contributions. However that will only ensure a Future Fair for some – not all.

What about retrospective action or compensation for those who have been robbed of their guaranteed pensions. There is a strong case for this. The government has a responsibility because successive governments promoted and encouraged joining private pension schemes and allowed employers to make membership compulsory. There was no requirement to warn members of the dangers.

Tomorrow in Glasgow a Pensions Summit will be held to call for government action.

Dr Ros Altmann will outline her proposals for a compensation scheme. An acknowledged expert on pension issues, she was an academic before working in the city and has been assisting the Number 10 Policy Unit on pensions.

Malcolm Wicks and other Department of Work and Pensions Ministers and officials have been meeting with pension scheme members whose schemes have been, or are being wound up and with MPs to discuss proposed solutions. They have said they will consider any constructive proposals. Ros Altmann will contend at the summit that the government can and should put this situation right. The summit is part of an continuing campaign which will not go away. I hope the government is listening.

Compensation would be a drop in the taxpayers ocean compared to the £14 billion tax relief which goes annually to people contributing to pensions. The cost of compensating those affected would probably only be £100m a year if agreed now and not all of that right away. If this was added to the benefits already in place in the government's Pensions Bill it would go a long way to restoring confidence in the UK pension system as well as putting right an indefensible injustice for these hard working and diligent people. Now that really would constitute “a fairer future for all”.