Examination of Witnesses (Questions 76-79)
DR ROS
ALTMANN, MR
BOB DUNCAN
AND MR
ANDREW PARR
22 JUNE 2006
Q76 Chairman: It is a great pleasure
to welcome Dr Ros Altmann, Bob Duncan and Andrew Parr, the latter
two who have been caught up directly, personally, in the occupational
pension failures. We are very glad to have you along, although
we are not glad about the reasons. You are here because you are
helping us to respond to the Ombudsman's report and the Government's
response to the Ombudsman's report. You have given us already
some very useful information. Ros, would you like to say anything
by way of a short introduction?
Dr Altmann: Thank you, Chairman.
Effectively, we are here today to explore how the Government can
dispute the findings of maladministration by the Ombudsman. The
evidence is clear. Firstly, the Government misled the public with
its official information, information which it chose to issue
in order to encourage people to join and which left out mention
of the huge risk that the Government itself created by policy
changes introduced from 1997 which have caused over 75,000 of
your constituents—we know of at least 200 MPs who have constituents
affected, and that is just the ones we know—to be stripped
of their pension. Secondly, in its oversight and changes to the
funding regime for pensions, even for the guaranteed minimum pension
alternative to the State Pension, the Government failed to consider
the security of workers pensions if their scheme were to wind
up. They just ignored the risks it had created to members' pensions
on wind-up. I have to try to understand the denial of the DWP
on the clear evidence that it failed to meet its own guidelines
and failed to stick to the assurances it has given to Parliament
and this Committee that in future its implementation would be
accurate, reliable and comprehensive. I think a number of the
things we have heard this morning may partly go some way to helping
us understand what is behind the Government's denial. I have,
as you say, two people here who were misled by government information,
who could have done something different. The belief the Government
has expressed, that nobody read its material; even if they did
they should not have believed what they read; and even if they
did they would never have done anything to protect themselves
anyway, suggests to me that we need to hear from people who can
demonstrate that that is just not a correct assumption.
Q77 Chairman: Thank you. I would
like to ask you, Mr Duncan and Mr Parr, to tell us your own experience
of the length of time you have been paying into your pension scheme
and when and how you discovered you were not going to get the
pension you thought you were going to get.
Mr Duncan: I am Bob Duncan. I
worked in the British United Shoe Machinery Company in Leicester
for 36 years. It went into receivership in October 2000. When
I first started there, there was a non-contributory pension scheme.
The unions fought for it and in 1976 we went into a company paying-in
scheme. I also started saving voluntary contributions. I paid
in for nearly 30 years. When I got made redundant and the firm
went into receivership, my pension fund, the day I finished, stood
at £8,000 for the year, plus my AVCs which were about £25,000.
I have been told now that I have completely lost the AVCs at the
moment. They have gone. The State Pension, we have been contracted
out and paying into a company pension scheme, and at the moment
I do not believe I am going to get the full State Pension. I have
been told by the independent trustees at the moment that we will
be lucky to get 7% of the £8,000. It still has not wound
up. It was October 2000 when the company went bust and we are
in 2006 now and we still have not wound the scheme up. I believe
that I read all the material from the Government over the years.
I was a union man. I did recommend to people that the company
pension scheme was a good scheme to be in because all the Government
material I had read said it was a safe scheme. After the Maxwell
report and everybody seeing the MFR, the minimum funding level,
if that was all right we believed our scheme was all right. We
just believed that. It has worked out that it is not and I feel
like I have been really, really misled. The Government have put
all these papers out, and, if I could not believe what the Government
said, who do I believe?
Q78 Chairman: You must feel that
you misled other people because—
Mr Duncan: I did mislead other
people. I was the union man. I had all these pamphlets. If anybody
went to the doctors, anybody went to social security, they would
bring pamphlets back. If anybody went anywhere, there were always
pamphlets on the union desk. I certainly misled apprentices when
they started, because you get young lads, 15, 16, starting work,
they go and they talk to the management and the management say
"Join the pension," it is the last thing they want to
do, is join the pension. They used to come down on the shop floor:
"Where is the union man?" and talk to the union man.
I used to recommend that they go back up and sign into the company
pension because I had read all the material and all the material
told me that company pensions were safe and guaranteed. I mean,
I do not know what the definition of safe is and I do not know
what the definition of guaranteed is, but it is certainly different
from what the Government thinks. Okay, I may be a thick Geordie,
but I am not a stupid one. I must have been thick to believe what
the Government told us.
Q79 Chairman: Mr Parr, do you want
to add your experience.
Mr Parr: Yes. I joined a company
called Sheerness Steel, a steelworks on the Isle of Sheppey in
Kent, in 1982. When I joined, joining a pension was a condition
of the employment. If I wanted the job, I had to join the company
pension scheme—and it was a very good pension scheme. All
went well until the late 1990s, when the steelworks was put up
for sale by its Canadian owners and was bought by a company called
Allied Steel and Wire (ASW) in Cardiff. There were many issues
about the purchase of the company that caused us great concern.
The steelworks at Sheerness was profitable—very unusual
in the steel industry—whereas Cardiff had not made any money
for about eight years. At the time, I was on something called
the Staff Consultative Committee (SCC). Sheerness was a non-union
steelworks. It was a single status company. The SCC was the line
of communication between the workforce and the management. When
ASW bought Sheerness, the Sheerness pension fund was in considerable
surplus. The management had not made any payments into it because
it was over-funded, and even in two years in the 1990s the workforce
got their contributions back. The retirement age had come down
from 65 to 63 and then to 62, and the personnel director had said
that the aim of the company was to get the retirement age down
to 60 in the very near future. We believed that, at the time that
ASW took us over, the pension fund was something like 110% funded
to MFR, although at the time everyone did not really know what
MFR meant. We did know that the pension fund at Cardiff was very
different. It had a retirement age of 65 and also it was under-funded.
One of the very first things that the management of ASW did when
they acquired the Sheerness site was to talk about merging the
two pension funds and, because of the very significant differences
in the terms and conditions of the pension fund—the different
retirement age, a different level of funding—the people
at Sheerness were very uncertain and very apprehensive of this
proposed merger. I have a little bit of a reputation for being
somebody who likes digging in for research, and, at the time,
I went and got as much material as I could about pensions. I went
to the FSA website and got a list of what they had. I downloaded
a lot of PDF files from them. I was in touch with the DWP department
that you can get booklets from, and I had those sent to me; I
did research on material from the NAPF; and I generally went through
everything I could find about pensions to find out what the legal
position was. In all of that there was nothing that suggested
there was any risk. I must emphasise that the steel industry is
a very, very risky business for its employees. In 1969, when I
first started working in steel, this country was producing 30
million tonnes of steel a year. It is now producing less than
10 million tonnes of steel a year. There are steelworks that have
closed all over the country and now we are really down to a little
more than the basic steelworks provided by Corus. I have always
known, working in the steel industry, that my job is at risk,
but it is an industry I enjoy working in and it is an industry
that is very interesting. When ASW took us over, I felt that the
risk to my job had gone up because of ASW's previous performance,
but there was nothing in any of the material that I had downloaded
and acquired from DWP that suggested my pension was anything other
than safe. The DWP booklets have a section in the middle of them:
"How do I know my money is safe?" It mentions all the
laws that protect pensions. Nowhere in that does it say: "Your
pension is only as good as your employer." The ironic thing
is that one of the leaflets I have here from the FSA has as its
title, on the front page, "Asking the right questions"
and the one most important question of all did not appear in here,
which is "How safe is my pension?" When ASW went into
receivership in June 2002, at first I told a lot of my colleagues
that we were okay for the pension because our scheme was 104%
funded. I assumed that, if a scheme was 104% funded, there was
enough money in it to pay out the liabilities. I told people our
pensions were safe because of what I had read. About two or three
days later the employee nominated trustees were called down to
Cardiff. They met with the independent trustee and came back with
the news that we would probably get something like 40% of our
pension and that would be un-indexed, and that was also if they
managed to do a good deal on the wind-up. But the whole issue
of what MFR means is something that has caused great confusion
to lots of people. I have here a report that my MP Derek Wyatt
sent to me. It is a research paper from the House of Commons and
it is dated 2004 in relationship to the Pensions Act. It is called
Pensions Bill, Bill 57, 2003-2004. The author of this Bill, from
the general statistics sections, says "The minimum funding
requirement was designed to protect accrued pension rights by
ensuring schemes have sufficient assets to meet their liabilities
should they be wound up." If a researcher with access to
all the information that is available in the House of Commons
Library can make a fundamental mistake like that, what chance
do employees of companies have?
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