The government has agreed to writing to the Public Accounts Committee about how it supports people in making informed financial decisions but has otherwise rejected most of the committee’s recommendations on the pensions of former employees of AEA Technology, such as reviewing pension indexation in the Pension Protection Fund. 

 

In June, the Public Accounts Committee published a damning report into the privatised AEA Technology, the former commercial arm of the UK Atomic Energy Authority which went into administration in 2012, leaving pension scheme members to receive PPF benefits.  

 

In the PPF, pre-1997 benefits are not uprated with inflation, and increases on later benefits are capped at 2.5% of the consumer price index. The committee therefore asked government to change the inflation protection rules in the PPF, but in its response, the Department for Work and Pensions said this would be a policy matter that requires a legislative change and that it “cannot respond further”. 

 

However, it agreed to write to the committee by September on how it supports people with taking financial decisions, saying: “The government recognises that decisions about pensions can be complex and significant.” 

On privatisation, AEAT scheme members had the option to leave accrued benefits in the existing public sector scheme, but most transferred them to a new private sector scheme.

 

Mentioning the ‘stronger nudge to pensions guidance’, as well as the recently revamped ‘midlife MOT’, the government said it will detail how it is “encouraging the use of appropriate advice and guidance and reducing the complexity of decisions savers are required to take”. 

   

    

 

   

As well as support for financial decisions, appeal routes for scheme members came under scrutiny in PAC’s report, but the government found that the Pensions Ombudsman and Parliamentary and Health Service Ombudsman have wide-ranging powers and changing their remit would be another policy matter. 

However, it agreed to “review ombudsman arrangements to ensure that all aspects of people’s interactions with their pensions have an adequate route of appeal” by autumn next year. The Pensions Ombudsman is already scheduled to have an independent review in 2024, with the work and pensions secretary appointing the independent reviewer. 

 

The government disagreed with the committee’s view that scheme members have been “passed from one part of government to another” and complaints about it should be independently reviewed, noting that ombudsmen decisions on complaints have been taken. It added that the “2013 Fair Deal policy means that the specific circumstances of this case would not happen again, as in cases of privatisation the pensions would now be expected to remain in public sector schemes”. 

 

In 1996, when the energy and environmental consultancy was privatised, transferring employees of AEAT were asked to choose between leaving their preserved pension benefits in the UKAEA pension scheme, transferring them into a personal pension, or take a special transfer offer to move them into the new AEAT pension scheme. This offer was, however, only available for one month.  

 

Nearly 90% of them joined the new scheme after assurances that benefits would be equivalent to the public sector scheme and the Government Actuary’s Department stating that the pension promise was unlikely to ever be broken by either the public or private sector scheme. According to the National Audit Office, scheme members later learned from freedom of information requests that GAD had made changes to its note to members at the request of the employers. AEAT had raised concerns that the way the note was written would discourage members from transferring their pensions. 

 

The DWP said it had nothing to add to the responses in the Treasury minutes. Parliament is currently in recess, including the Public Accounts Committee.