Memorandum by Nigel Goulding
THE SCANDAL OF DISAPPEARING PENSIONS
I am one of at least 80,000 people who has suffered
the loss of all or a significant proportion of their pension expectation
when their employer has gone into liquidation leaving a final
salary pension scheme grossly under funded.
Until November 2003, when the company went into
liquidation, I worked for Irish Fertilizer Industries Limited,
Belfast. (IFI traded in Northern Ireland and for some products
in GB as Richardsons Fertilisers, the name under which the company
was formed over 100 years ago). For several years during the 1990s
the European fertiliser industry underwent significant change
resulting in many factory closures and amalgamations. IFI, for
a long time, had benefited from a source of competitively priced
raw material we knew that the lifetime of this source was limited
and that it would then take big price increases for our products
and those of our competitors for us to remain viable. In the months
prior to the closure of IFI it became increasingly obvious that
something must happen, because, unfortunately market prices were
not rising in line with our increased raw material costs.
As employees we were concerned about our employment
prospects but we thought we were able to sit back, safe in the
knowledge that we would be the beneficiaries of a damn good pension
scheme, as befits a "blue chip company". Sadly, as we
now know, this was not the case—a fully approved and properly
constituted occupational pension scheme was under funded and unable
to meet even its minimum obligations. Not only did we find that
our scheme was under funded we found that due to different, European
type pension regulations, our colleagues in ROI would receive
their benefits in full, which does beg the question "why
were similar safeguards not required to be built into UK based
occupational pension schemes?"
We subsequently learned that the government,
faced with an embarrassing number of enforced closures of under
funded occupational pension schemes, has established the Financial
Assistance Scheme but I understand the benefits will be limited
and not available to everyone. We also learn that, in line with
the rest of Europe, there will be a government sponsored Pension
Protection Fund, but that the benefits of this fund only become
effective for closures April 2005 onwards.
Like many of my own and earlier generations
I was encouraged to join my employer's pension scheme as soon
as I was invited to do so. In those days it was an honour and
a privilege to be invited to join the pension scheme because the
benefits were so obvious. Every document I read, whether produced
by my employer or by or on behalf of a government department or
agency stressed the benefits of joining an occupational pension
scheme, with only one negative aspect—the obligation to
make a monthly contribution from salary. I even remember a time
when personal pension plans were being actively promoted with
support from the then government, my employer wrote to all pension
scheme members reminding us of the benefits of being in an occupational
pension scheme and to seriously consider what we were giving up
if we decided to opt out of our occupational scheme in favour
of a private pension scheme.
Following the Maxwell scandal and the public
statement that many employers were taking "contribution holidays"
I began to take rather more interest in the management and administration
of occupational pension schemes.
As I understand it, an occupational pension
scheme must be approved by and registered with the Department
for Work and Pensions or similar government department. In order
to be approved the scheme must establish sufficient funding, the
MFR to be able to guarantee to pay a pension at least equivalent
to the state second pension, but generally expected to be better,
to all the members. The members then qualify for reduced NI contributions.
I feel that I joined the IFI (Richardsons) Pension
Scheme with my eyes open, fully expecting the resources to be
available to pay the members benefits "come what may".
In fact, quoting from the introduction to the Richardsons Fertilisers
Staff Retirement Benefits Plan Members' Summary:
"The level of benefits provided under the
Plan reflects the Company's concern that all staff should enjoy
first class conditions of employment.
The Plan is approved by the Inland Revenue under
the terms of the Finance Act 1970 which means that members enjoy
important tax advantages. The Plan also meets the requirements
of the Occupational Pensions Board for the Purpose of contracting
out."
"The Plan is approved . . .". Does
this not suggest that whoever approved the plan took responsibility
for ensuring that the fund was able to meets its commitments and
if it did fail to meet its commitments does it not suggest that
whoever approved the plan took responsibility for ensuring that
the disadvantaged members received their expected benefits?
I am approaching 56 years of age, friends are
planning their retirements or have already retired. I am planning
ways to make sure I shall be able to work for as long as possible
to maximise income and to generate a reasonable fund in a money
purchase pension scheme, where the best benefits are not seen
in anything less than 10 years.
I suppose I have been lucky, managing to begin
a new career after the age of 50 with the chance to save towards
another bit of a pension.
I am concerned that the government has seen
fit to not accept and act upon the report of the pensions Ombudsman
who carried out a thorough investigation into the approval, administration
and management of occupational pension schemes, concluding that
members joined pension schemes believing them to be 100% secure,
based on how the schemes were sold to them.
I firmly suggest that the government should
be encouraged to reconsider its position and should introduce
compensation for those 80,000 people who have lost some or all
of their pension rights so that they can look forward to a retirement
to some extent free of financial worry and the need to rely on
state hand outs because "they are getting what they have
saved for".
14 June 2006
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