BEIS Committee: Miners should get pension uplift and improved surplus sharing
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The government should distribute £1.2bn it is due from the Mineworkers’ Pension Scheme to the scheme’s beneficiaries and change the surplus sharing arrangement so the public purse can only benefit if it has had to plug any deficit, MPs have recommended.
Since the privatisation of British Coal in 1994, the government has been providing a guarantee to the Mineworkers’ scheme, in return receiving half of any surplus generated. To date, it has not had to contribute to the scheme and has received £4.4bn, with another £1.9bn due, an arrangement that pensioners and trustees say is poor value for money.
Living up to levelling up
The Business, Energy and Industrial Strategy committee conducted an inquiry into the arrangement and on Thursday published its report. In it, MPs side with pensioners, saying that “the price of this guarantee is no longer fair”, and citing the “historic injustice" they suffered.
“The beneficiaries of the Mineworkers’ Pension Scheme toiled in dreadful conditions, to keep the country’s lights on. Many now live with industrial diseases caused by the dangerous nature of their former occupation. The least they should expect in return is the secure retirement they were promised decades ago,” they argue in the report.
MPs say the government should accept its moral obligation towards miners and live up to its aim of ‘levelling up’ the regions which have been economically left behind.
Pensioners should receive an immediate uplift, they said, recommending that the government hand the £1.2bn it is due to receive from the scheme’s investment reserve to miners.
They are also recommending a change to the 50/50 surplus sharing arrangement currently in place: “The current arrangements should be replaced with a revised agreement in which the Government is only entitled to a share of surpluses if the Scheme falls into deficit, and the Government has to provide funds. In that event, the Government should be entitled to 50% of future surpluses up to the total value of the funds it has provided to make up any shortfall.”
This would both take account of “the vast funds the Government has received thus far and the significant reduction in the risk it faces” and would also ensure that neither party will be out of pocket in future.
MPs: Government was negligent not to take actuarial advice
The committee called the 50/50 split “arbitrary” and says the government was “negligent” not to take actuarial advice before imposing it.
MPs say that the government guarantee to the scheme has contributed to its investment success and benefitted scheme members.
Nevertheless, “we are not convinced by the Government’s argument that its entitlement to 50% of surpluses is proportionate to the relatively low degree of risk it actually faces in practice”, they add, pointing out that the number of scheme members and the relative size of the fund have fallen significantly since 1994.
With no formal review mechanism built into the agreement, pension members remain tied to an expensive arrangement, they say, adding that “governments should not be in the business of profiting from mineworkers’ pensions”.
How might the government respond to the committee's recommendations?