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5.11 pm
Paul Holmes (Chesterfield) (LD): I want to concentrate most of my comments on the need to restore confidence in the pensions system, which was referred to earlier by for example, the hon. Member for Cardiff, West (Kevin Brennan). In large part, this Bill is trying to restore that shattered confidence by plugging loopholes and rectifying mistakes that stem from the Pensions Act 1995, which in turn was trying to deal with the shattered confidence after the Maxwell scandal.
The position for pensions is predicated on an insufficient state pension, which for some is topped up by the complex means-testing of the pension credit. For a growing number, however, the Government hope that it will be supplemented by private pensions. The Government make a virtue of the fact that the state pension is insufficient—the Chancellor recently eulogised abut the fact that pensions will take about 5
per cent. of our gross national product in future compared with 15 per cent. in some western European countries. Having such a low state pension means that people must save for private pensions. If they are to do so, they must have confidence in the system—confidence that a lifetime's savings and investment in a pension fund will not be wiped out at the drop of a hat.With the pension protection fund, the Bill proposes some measures to try to restore that confidence. Issues have been mentioned, which will be pored over in detail in Committee, such as the relationship between a flat-rate levy and the introduction of a risk-related levy, and whether that will be underwritten by the Government. In the USA, a similar scheme has run well for nearly 30 years. It was introduced initially in the mid-1970s to restore confidence after a major company in the American economy—Studebaker, I believe—went bust. Recently, after nearly 30 years of successful running, it has hit a crisis owing to the state of the stock market. As one hon. Member suggested, it may well have to be or already has been underwritten by the Government. Inevitably, that issue will need to be considered for the UK system. If the pension protection fund, either in its first year or 30 years down the line, hits similar problems to the American one, why crisis-manage at that stage rather than plan for it in the Bill in Committee?
The other area in which confidence must be restored is with regard to those who in good faith accepted the Government's urgings and promises over the years and saved for an occupational pension, but have found that they have lost most or all that money. That was first brought home to me just a few weeks after I was elected in 2001, because United Engineering Forgings put its six companies across the country into administration. Chesterfield Cylinders, in my constituency, was one of those companies. It is now trading profitably and successfully under new ownership, with the same excellent work force and local management, but without its pension.
As a result of meeting Chesterfield Cylinders pensioners in Chesterfield, and another company that shortly afterwards arrived at the same process—Dema Glass in Chesterfield—I first wrote on this issue to the Minister for Pensions on 26 November 2001. I have been raising the issue since then, both in oral questions and in debates in the Chamber. Incidentally, looking back over that letter, I note that one of the four points I asked him to consider was whether actuaries should be required to provide annual rather than triennial reviews and forecasts. I made that request specifically because workers at both Dema Glass and Chesterfield Cylinders had been persuaded by their employers to keep paying into the pension fund when the firm was beginning to hit problems. Moreover, in the case of Chesterfield Cylinders they had been asked to increase their contributions. Had they had the benefit of annual projections from the actuary they might well have chosen not to go down that route, because in a fairly short time those companies went bust and they lost most of their pension. I am interested to see in the Bill a suggestion that actuaries will be required to report annually rather than triennially.
Following Dema Glass and Chesterfield Cylinders, the issues continued to develop around the country. Most recently, late last year Coalite, a very large company just outside Chesterfield employing many
people in my constituency, went the same way. The workers in those three companies form just part of the estimated 60,000 pensioners across the country who have lost all or most of their pensions in that way. About 90 per cent. of the companies affected, including those in my constituency, have been in manufacturing—in the ex-coal industry, the steel industry and the glass manufacturing industry—but that is a side issue, a debate for another time.My hon. Friend the Member for Northavon (Mr. Webb) rightly said that we should not become too lost in the statistics, however we look at them. Whether 60,000 people have lost their pensions or whether the £100 million a year it might cost to compensate them is a huge sum that the Government cannot possibly meet or, as the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt) described it, is small change, should not dominate too much. We should remember the individuals involved and their anger. The hon. Member for Ayr (Sandra Osborne) gave eloquent examples of constituents who have gone through the process.
I should like to add examples from my constituents, real individuals from Chesterfield, who illustrate the points that have already been made about broken promises and the need to restore confidence in the system. The first, whom I met in 2001, was a Labour councillor in Chesterfield—this is a cross-party issue, not a partisan issue. He still works for Chesterfield Cylinders. He told me that he had worked in the steel industry for his entire working life. When he began work, membership of the works pension scheme was compulsory, as we have heard from a number of hon. Members relating to firms in their constituencies. Over the years, Governments of various political complexions promised that such schemes were safe, especially after the Pensions Act 1995 and the Maxwell scandal. However, my constituent found in 2001 that he had lost between 60 per cent. and 80 per cent. of the money he had saved for 40 years. Approaching the end of his working life, he was too old and it was too late even to contemplate starting to save any worthwhile sum to replace the money of which he rightly felt he had been legally robbed. He had done all the right things, he had made all the provision that had been asked of him, and he feels bitter and angry that he has lost his private pension.
Later that year I visited a constituent on her 60th birthday. When her children were very young, she had become a single parent, but she had not sat back and said, "The state will look after me and my children." She had done all the things that various Governments over the years had urged her to do. She had gone out to full-time work, for Dema Glass, and successfully raised two teenage daughters single-handedly. She had saved and managed to pay off her mortgage. In the last 10 years of her working life, she had even saved towards an occupational pension, only to receive two days before her 60th birthday a letter explaining that all or most of her pension had disappeared and she would not receive the money for which she had worked so hard.
Those are two examples of people who lost their money. I have an interesting third example: the daughter of the lady I have just mentioned. She was aged 26 at the time in question. She works for a well-known large
national and international retail company, which is nearly 100 years old. It seems an absolutely rock solid, safe bet. She was about to start paying into the works pension scheme, but then she witnessed what had happened to her mother and heard what had happened at Chesterfield Cylinders. She asked me, "Why bother? What is the point at my age, in my 20s, starting to save for a lifetime for a private pension, even with a firm that seems absolutely rock solid?" As I have said, 30 years earlier, when her mother started working for her pension, Dema Glass had seemed rock solid too. It was one of the major employers in Chesterfield—a really safe company that dominated the market. "Who knows?" she said. "Twenty or 30 years down the line, this might happen to me."We must provide justice for those who have lost their pensions in that way, and we must restore confidence to the younger generation. Were these people acting in good faith when they felt that they had been promised—guaranteed—that their pensions would be safe? The pensions action groups, which have received many tributes, have proved very good at unearthing documents to illustrate the way in which people feel they were misled.
One action group member sent some quotations. The modern version of the document produced for trustees of pension schemes by the Occupational Pensions Regulatory Authority states on page 39:
- "The purpose of the minimum funding requirement is to try and make sure there are enough funds in the scheme at any one time"
- "However", it is not designed to guarantee that the trustees could secure or buy out all benefits . . . if the scheme discontinued."
- "OPRA has been entrusted by Parliament with enforcing some very detailed provision introduced by the Pensions Act 1995 and associated regulations. These provisions are designed to help members have justified confidence in their scheme."
- "The minimum funding requirement refers to the minimum amount of funds that should be in the scheme at any one time, in order to meet the scheme's liabilities if it were to be discontinued."
Other documents and speeches make interesting comparisons. Someone from the Dexion group, for instance, sent a quotation from a company document which stated:
- "All benefits which have been earned in the Dexion Group Pension and Insurance Scheme are protected by the law and by the Trust Deed and Rules."
- "We aim to create a framework for occupations pensions that is secure, stable and fair, and to encourage people to make provision for their retirement . . . It is a remarkable thing that individuals in this country, through their pension schemes, have such an immense ownership of wealth. It is good for them and the economy, and we want to make sure that that wealth is not only safe but is recognised as part of the rights that people have as a
- result of their savings during their working lives . . . we must not trade off security to achieve lower burdens on business."—[Official Report, 3 November 1993; Vol. 231, c. 358–64.]
- "will mean that members can be confident that the value of their accrued rights is secure, especially in the event of the scheme or the employer company winding up."
- "It is only right that the members' investment, and their accrued pension rights, should be properly protected. Our proposals are designed to provide that protection."—[Official Report, House of Lords, 13 March 1995; Vol. 562, c. 684.]
In conclusion, I repeat that the Bill needs to do two things. First, it must provide justice for the estimated 60,000 people who have lost out in the past few years. Those people believed that they had a guaranteed and protected pension, for which many of them had saved for 30 or 40 years. Secondly, the Bill must restore the confidence of the younger generation. To ensure a good retirement with an inadequate state pension, young people must save and invest more than any previous generation, but they are telling politicians and parents that the problems of recent years mean that they see no point in doing so.
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