§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Murphy.]10.28 pm
§ Mr. Derek Wyatt (Sittingbourne and Sheppey)
I am most grateful that you, Mr. Deputy Speaker, have given me this opportunity to discuss pensions and, in particular, the plight of workers at ASW Sheerness and ASW Cardiff. I know that my hon. Friend the Member for Cardiff, West (Kevin Brennan) also hopes to catch your eye.
This has been our second day of lobbying Parliament. Fifty-two Members have already signed our early-day motion and, late last night, I handed in the ASW Sheerness petition to the House. I am most grateful to see so many Welsh Labour colleagues here to support me.
Yesterday, the ASW pension action group from both Sheerness and Cardiff saw my right hon. Friend the Minister for Pensions, my hon. Friend the Financial Secretary to the Treasury as well as Des Hamilton from the Office of the Pensions Advisory Service and Mr. Geoffrey Norris at No. 10 Downing street. I know that from our debrief later on yesterday evening that the group found the meetings helpful, stimulating and thought provoking. Even at this early stage of our negotiations for a just settlement to the pension fund, I want to place on record my thanks to Ministers for their willingness to engage in this process.
Three months ago, I was looking forward to a quiet weekend and was independently minding my business on the train home to Sittingbourne when I was called on my mobile just after 7.15 pm on Thursday 4 July 2002 by Graham Mackenzie, the then chief executive officer of the ASW Group. He told me that the company was likely to go into receivership.
It took me some time to find all our Ministers and some of their Welsh equivalents. It was well past midnight before I reached the Secretary of State for Trade and Industry, who was still up preparing her speech in a hotel in Cambridge.
I should like to add a note of thanks and gratitude to my right hon. Friend the Secretary of State, my hon. Friend the Minister for Employment Relations, Industry and the Regions, who is responsible for manufacturing, and the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Rotherham (Mr. MacShane), as well as the First Minister for Wales and, again, Mr. Geoffrey Norris at No. 10, for trying to find a way of preventing the company from going into receivership. The blame can be squarely laid at the door of the dithering bankers representing a once-famous bank, NatWest.
Unless we are in our 50s and beginning to think about retirement—that fantasy house we have dreamt about or that cruise we have always wanted to take—we rarely think about our pension and what it is worth. We pay into a scheme and expect it to bring if not rich dividends, at least a comfortable existence. I am beginning to think that a large majority of working people in this country are in for a nasty shock.
435 About 8.5 million people in the UK have a final pension scheme. They are also known as defined benefits schemes. In practice, they are a way that our people save for a second pension, knowing that the state pension will not always cater for all their needs. All Governments have encouraged employees to take out such pensions. I am also beginning to suspect that final pension schemes will become better known over the next few years as the pension virus that slipped under our doors at work and disappeared through the cracks in the window. I suspect that many final pension schemes are in deficit. Over the past few months, I have read that BT and Trinity Mirror's pension schemes are billions of pounds in debt. I wonder how many other FTSE 100 companies' schemes are in the same boat.
The analysis by the TUC of the Government Actuary's figures suggests that 1.8 million fewer employees are in final salary schemes than a decade ago. Its figures show that there were 5.6 million employees in such schemes in 1991 compared to 3.8 million in 2001. Of those, only 200,000 have transferred to money-only schemes, some of which are inferior, leaving a net loss of 1.6 million fewer people with any form of occupational pension. So pensioner poverty—something that the Government are proud to be helping to solve—will be a growing problem unless we do something about it now.
I am of course aware that the Government are preparing a Green Paper on pensions which is being drawn up by the Department for Work and Pensions and the Treasury. Green Papers are the slow burn of Governments. They take between three and five years to be enacted. FTSE 100 companies would never sanction Green Papers because none of the blue-sky thinking is ever costed. That is indicative of Whitehall culture, which finds doing basic sums difficult. How can politicians, stakeholders and our citizens and would-be voters ever understand what choices they have unless they know what the costs will be to both the Exchequer and, frankly, their back pocket? It is naïve of civil servants to maintain that absurd situation. I hope to persuade my right hon. Friend to ensure that the Green Paper, which I hope will be published before Christmas, comes with fully costed models so that we can better understand the alternative packages that are before us. Not to do so would be a great mistake. I want to see an end for ever to pensioner poverty. At the same time, we all need to know the likely cost implications.
Let me return to the grave issue of the ASW Sheerness pension problem. I have been made redundant twice in my life. The first time was a shock; the second time was shocking. The experience burns a hole in one's being. It burns doubly when a person has a young family and a hefty mortgage to pay. It hurts our closest relationships. Imagine then that at the same time as being made redundant, someone is told that their final salary scheme has been placed into administration and that, because of the arcane system, it may be three, four or five years before it is possible to know what it is worth and whether what that person has been saving for is worth anything at all. It is the worst kind of double whammy. That has happened to more than 1,000 workers at both ASW Sheerness and ASW Cardiff. They are powerless. They have been mugged by the pension virus.
436 It is not just ASW workers who have experienced that appalling problem. Nearly 300 final pension schemes have been wound up this year, affecting 40,000 people. Consider the case of Lister's in Haywood, Lancashire. Its workers were originally told that they would get around 75 to 80 per cent. of their expected pension, but ended up with nothing. The hard-cash figures were stunning. The fund value was £6 million. The independent trustee charged £400,000. The legal fees were £80,000. KPMG receivers charged £49,000. For setting up the pensioners' annuities, Abbey National charged £130,000. There were other miscellaneous costs of £140,000. That gave a total of £800,000 of costs to administer a failed pension scheme, which is nearly 14 per cent. of the fund value.
United Engineering Forgings in Ayr, Scotland, went into insolvency and it was revealed that the employees' pension fund, run by Prudential, was underfunded to the tune of £12 million. Let us consider the case of Albert Fisher Group, which acquired Saphir Produce, whose pension fund was transferred to Albert Fisher. When Albert Fisher went broke, pensions from the original company, Saphir, were worth nothing.
In our meetings yesterday with the Minister for Pensions, the ASW pension group left nine questions for him to answer. I shall spare his blushes by not reading them into the record because I know that he has promised to respond to them over the next few weeks. However, I want to tell him about three cases to show him the brutality of the system. At ASW Sheerness a man with 31 years' service was due to retire on 31 July 2002. He had a written statement of pension benefits for that date which he naturally assumed to be legally enforceable. He has lost £3,600 per annum through the pension fund being put into administration. Ironically the date of his retirement was originally agreed to suit the company's requirements, and had he insisted on taking his pension sooner he would have lost nothing.
The second case concerns another man with 31 years' service who was due to retire on 31 August. He too had a written statement of benefits. After wind-up, the 30 per cent. reduction knocked more than £3,200 per annum off his pension. In this case it did not leave him enough to survive on and he has had to carry on working beyond his planned retirement date. The third case is that of a man who will retire at the end of November after 26 years in the pension fund. He has not even been advised yet of his reduced figures. He faces the prospect of retiring on an unknown but certainly heavily reduced retirement income without even the opportunity of continued working to offset the loss. Some of these people have worked 20, 25 or 30 years and paid £100 a month into a pension fund, and they have no rights over it. There are many more details of cases on a clever website, www.pensionstheft.org, which I urge Members to read.
§ Mr. Wyatt
I will not.
I suggest to the Minister that there is a solution, which I hope will be included in the Green Paper. We need to take a lead from the USA and introduce a pension benefit guarantee. In the USA, when Polaroid and LTV, 437 ironically a steel company, filed for bankruptcy earlier in the year with serious shortfalls in their pensions, the guarantee came into play and the deficit was made good. Will the Minister consider introducing that scheme? However, instead of asking the financial markets to take the risk, could we consider funding it through the national insurance scheme that we all pay into? Will the Minister cost that option and show the figures in the Green Paper? That is the quickest and cleanest way to stop future workers being mugged.
In ASW's case, however, my workers may have to wait between three and five years before they find out whether they have a pension because the independent trustee can more or less take as long as he likes. It is, after all, in his interest to do so because he takes his fees from the pension fund. There is a case to be made for an independent trustee organisation, akin to the current Pensions Advisory Service, to be paid for by the Government.
While those workers are waiting, we would welcome the Government's commitment to right that wrong by making an ex gratia payment into the ASW pension funds at Sheerness and Cardiff. That would correct the appalling injustice and show our people, as we have done with the miners compensation fund and the Chatham dockyard workers, that this Government have proudly honoured their responsibilities, in sharp contrast to the Conservative party, which, on those two issues, sat on its collective hands for 18 years, refusing to budge. I implore the Minister to help us to secure that one-off payment to the ASW pension funds.
§ Kevin Brennan (Cardiff, West)
I congratulate my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt) on securing this debate. I apologise for my voice, which was over-exerted in cheering Wales in its victory tonight over Italy.
This is a very serious issue, and I rise to speak as a Cardiff Member. The ASW plant in Cardiff is not in my constituency but in that of my right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael), whose ministerial office precludes him from participating in this debate. I should also like to mention the interest of my hon. Friends the Members for Cardiff, North (Julie Morgan) and for Cardiff, Central (Mr. Jones), who are present.
Yesterday, I went with representatives of the work force of ASW in Cardiff, my hon. Friend the Member for Sittingbourne and Sheppey and representatives of the ASW work force in Sheerness to meet the Minister for Pensions, the Financial Secretary to the Treasury and other Ministers and advisors to discuss the plight of the ASW workers. It is fair to say that many of us did not realise the jaw-dropping injustice—that is the only way that one can describe it—of current occupational pensions law.
I spoke yesterday to someone called Brian from ASW in Cardiff. He is one of many who have worked for the same company, man and boy. He paid 5 per cent. of his salary into the pension scheme for 24 years on the promise that he would receive as a final pension an accrual rate of one 60th of his salary for each year's service. He might have expected, at current values, to retire on a pension of about £12,000. He did not choose 438 to join the pension scheme; it was a condition of employment when he was a young man that he joined it. He did so in the expectation and on the promise that at the end of the day he would receive a pension. He never realised that if the company went into receivership he could lose everything—that he could end up with nothing.
In fairness, as I am sure my hon. Friend would agree, the situation in Cardiff might be even more critical than in Sheerness because the workers in Cardiff have no idea whether they will receive any pension at all once the benefits of the pension scheme have been distributed to current pensioners and the independent trustee has taken his cut. That is another issue, because the independent trustee is allowed to set his own fees, write his own cheques and take whatever proportion of the pension fund that he wishes in winding it up. There is no incentive whatever to do the job quickly, efficiently or effectively.
§ Julie Morgan (Cardiff, North)
I am sure that my hon. Friend would agree that the members of the ASW work force in Cardiff whom we met in Blackpool felt deeply aggrieved at the fact that every phone call that they made to the independent trustee cost an enormous amount of money—more than £300 per hour, I think. That emphasises my hon. Friend's point about the independent trustee being able to charge what he likes and take it out of the pension fund. Every phone call that the work force make reduces the amount of money that they are likely to receive.
§ Kevin Brennan
I am grateful to my hon. Friend for making that point because she is absolutely right: the workers are frightened to phone or write to the independent trustee because they know that every time they do so they are robbing themselves. Every time that he is asked a query about their pensions he will charge it to the fund. They face that uncertainty for three to five years.
The principles are all wrong. Pensions should be about security in retirement. It is completely wrong that the workers bear the risk when a company goes into receivership. I thought that shareholders were supposed to bear the risk of an investment, yet when a company goes under, their debts—those of the banks, anyway—are secured. The workers bear the risk not only of losing their jobs, as, sadly, many in Cardiff already have—some of them hope that they might get them back eventually, but many of them are out of work—but of losing their pensions. That cannot he right. It cannot be right that workers' pensions are put at risk when a company goes into receivership.
Wherever there is a risk, there must be a system to spread it across the entire pensions industry in the form of some discontinuance fund—or whatever one wants to call it—to protect workers. I urge the Minister to consider that in the Green Paper and to consider legislation in that regard. In the meantime, I urge the Government to consider very carefully the possibility of assisting the workers in their current plight.
§ Kevin Brennan
I will not be giving way. I suggest that the hon. Gentleman studies the courtesies normally observed during Adjournment debates. I will not give way for that reason.
I plead with the Minister to consider what legal means are available to help the workers in their current plight, and to consider the future when the Government next legislate on these matters.
§ The Minister for Pensions (Mr. Ian McCartney)
On behalf of the Under-Secretary of State for Wales, who is present tonight, and myself, I congratulate my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt) on securing the debate, although I offer no congratulations in respect of its subject matter. He has demonstrated a model of best practice in how Members of Parliament should act to protect the interests of their constituents. I know that in the past 24 hours alone he has lobbied the Prime Minister's office, the Financial Secretary to the Treasury and myself; tabled an early-day motion with more than 50 signatures; and organised a petition, which was handed in to No. 10 yesterday. That has generated a huge amount of media interest, which I imagine will continue for some time.
I was not only sorry to hear about the case in yesterday's meeting, but I became more frustrated, agitated and, not least, angered as the full details of the case were unravelled in front of me. It must be causing those affected considerable distress and concern, and I am concerned that many individuals feel isolated and are receiving insufficient information about their future financial arrangements. I am therefore grateful to my hon. Friend for highlighting the problems facing members of the Allied Steel and Wire pension scheme.
The meeting that I attended with my hon. Friends the Members for Sittingbourne and Sheppey and for Cardiff, West (Kevin Brennan) and representatives of the ASW pensions action group was constructive. We identified several practical ways forward. I undertook to address a number of technical pensions issues in a detailed note to the action group and my hon. Friends, and to discuss the issues raised and the Government's approach to them with colleagues throughout Government. I shall also write to the independent trustee and OPAS about the range of concerns listed yesterday by the representatives of the steelworkers. I shall also write to the Secretary of State for Trade and Industry and the pensions ombudsman specifically about the circumstances surrounding the early retirement packages of the two former ASW directors. Furthermore, I will reflect on how we might be able to help, by, for example, providing support from our officials and working with my hon. Friends.
My hon. Friend the Member for Sittingbourne and Sheppey has called for the Green Paper to include costed models. I assure him that when we publish the Green Paper later in the year, it will include a financial assessment of the implications of our proposals—indeed, alongside the Green Paper we will publish a technical document that will set out that sort of detail and other material supporting our proposals.
The case raises two important issues. One concerns the fairness, or otherwise, of the current statutory priority order. The Pensions Act 1995 introduced a 440 statutory priority order for occupational pension schemes that are subject to the minimum funding requirement and start to wind up from 6 April 1997. It sets out how the assets of the scheme are to be applied towards meeting the scheme's liabilities for pensions and other benefits.
The rationale behind the statutory priority order was to produce an equitable distribution of assets when a scheme winds up. That does not mean that the current priority order is ideal or, indeed, immutable. In fact, Alan Pickering's recent report has proposed a change in the order that might go some way to helping deferred as well as existing pensioners. I am sympathetic to what was said to me yesterday and to what Alan Pickering had to say in his report. We will examine that extremely carefully when preparing the Green Paper on pensions.
The second issue concerns the position of any debts due to the pension scheme in the overall priority list of creditors. Certain unpaid pension contributions may be pursued as a preferential debt in the event of insolvency of the employer. It seems to me that the issue is whether the contribution that employees have made—often over many years—to the success of their company and to the running of their pension fund, should enjoy a preferential status. I believe that the answer to that is self-evident, and I assure my hon. Friends that I will raise the matter with ministerial colleagues at the Department of Trade and Industry.
In the meantime, my hon. Friend will be well aware that the Enterprise Bill will abolish the Crown's preferential right to recover unpaid taxes, and those changes will mean that the position of the remaining preferential creditors will be improved in cases where there is insufficient money to pay them in full.
It may also be possible under the provisions contained in the Pensions Act 1995 for members of the ASW pension schemes to have their state scheme rights restored, thus ensuring that they receive an additional pension under the state scheme in addition to their basic state pension. I will be writing to my hon. Friends and the group about this later.
Some of the concern in this case has centred on the activities of the independent trustee. I received a number of complaints about the trustees yesterday. I asked for those to be made to me in writing, not because I do not believe them but because I want them to be set out accurately. As soon as I have received these complaints, I have given an undertaking to raise them directly with both the independent trustee and with the Occupational Pensions Regulatory Authority.
When a scheme like ASW is winding up, it is understandable that members have genuine concerns about the cost of trustees' fees. The law requires the independent trustee to disclose the scale of the fees that have been charged to scheme members.
Independent trustees should also be able to demonstrate to OPRA that they are acting professionally and in the best interests of the members. If that is not the case, OPRA can replace trustees where it has evidence that those appointed by the insolvency practitioner are failing to carry out their duties in a responsible manner. As soon as I receive information and have confirmed what was said yesterday, I shall take steps to address the issues directly with the independent trustee and OPRA.
441 My hon. Friend has been in correspondence with me on issues involving additional voluntary contributions; he raised the issues with me again at yesterday's meeting. I have agreed to respond to specific cases that were taken up before yesterday. When I am sent further information, I undertake to write to my hon. Friend on the general issues of AVCs and how they relate to the various schemes in this context.
Under Inland Revenue rules, people can now take AVC benefits at any time between 50 and 75, whether or not they have left employment and whether or not they have started to draw their main scheme pension. However, scheme rules must have been amended to allow this. Therefore, before I can give a detailed answer to my hon. Friend, I shall await the details of the schemes as AVCs relate to them.
Having said that, I do not, unfortunately, know all the details of ASW's organisation of AVC arrangements. If there are additional problems in these areas, perhaps the best thing would be for my hon. Friend and his group to come back to me with fuller information. At each stage, we will see what we can do to assist the process of securing information and ensuring that the arrangements that are sought are available within the rules of the scheme.
My hon. Friend has called for an ex gratia payment to be paid into the pension scheme. I would not like to give him false hope. Indeed, I cannot give him any hope. The Government are not able to assist schemes in wind-up that are underfunded. I am unaware of any legal basis on which Ministers can make such payments. However, my hon. Friend mentioned payments to the miners compensation fund and the Chatham dockyard workers. I shall certainly look into those instances to ascertain whether they offer any way forward, while acknowledging that there may be significant differences between them and the current situation. I do not draw any parallels but I shall ensure that no stone is left unturned to try to resolve the questions that my hon. Friend raises. I will look into these matters and respond to him directly.
My hon. Friend called for the introduction of a form of pension benefit guarantee. The Government have previously considered putting in place measures to assist occupational pension schemes when the sponsoring employer becomes insolvent. Both issues of a central discontinuance fund and compulsory insurance were consulted on as part of the consultation process for the replacement of the minimum funding requirement. Both options received little support. That is mainly due to two factors. First, the majority of schemes are well run in this country. Those who are members of schemes and the trustees who represent them were not supportive of the idea that they should top-slice their well run schemes to assist the underfunding of poorly run schemes. Nor was there any great support for the idea of a fund linked to 442 an insurance-based system. An insurance system would have to be created to re-invest in the risk associated with it. There was little support when we consulted on that.
A central discontinuance fund raises issues of affordability and sustainability, as well funded schemes would have to subsidise schemes that were less well funded or less well looked after. This option would also require, as I think my hon. Friend was hinting, an ultimate guarantor—that is, the state. The Government would be unable to take on this responsibility and the cost would ultimately fall on the taxpayers, including taxpayers paying into a well funded scheme and paying national insurance contributions, and taxpayers who have no other scheme at all and rely on the basic state pension scheme. There is therefore no possibility at this stage of the Government acceding to such a request.
Further, the issue of compulsory insurance arrangements raises the potential for abuse and a moral hazard. Some schemes may neglect their responsibilities and obligations to their members, in the knowledge that their liabilities will still be met in the event of insolvency.
I am aware that a number of concerns have been raised about the length of time that it can take to finalise arrangements when a scheme winds up. With this in mind, the Government introduced a package of measures in April this year designed to speed up the winding-up process. That legislation is part of the Government's continued commitment to enhancing the protection for pension scheme members. The legislation places greater visible accountability on those involved in winding up a pension scheme. The new rules mean that OPRA will have a more proactive role in facilitating the winding up of schemes and supporting the trustees.
In the light of the concerns raised, perhaps my hon. Friends would like me to arrange a meeting with OPRA on that specific point. If they want that to happen, I will make the necessary arrangements.
Finally, occupational pensions are an important part of the overall benefits or remuneration package offered by many employers to prospective and current employees. The forthcoming Green Paper on pensions will allow us to consult widely on how both employers and employees can be encouraged to acknowledge the value of this part of the remuneration package.
I therefore look forward to continuing a constructive dialogue with my hon. Friend and will pursue the matter on behalf of his constituents. I will do so in an honest and fair way. Where I can help, I will say so and do so. Where I cannot, I will be strictly honest about that. If we can work on that basis, I hope that I can help my hon. Friend and other colleagues in the House in their efforts to resolve a complicated and difficult situation. I wish him well, and anything that we can do to assist will be done.
§ Question put and agreed to.
§ Adjourned accordingly at three minutes to Eleven o'clock.