Examination of Witnesses (Questions 120-126)
DR ROS
ALTMANN, MR
BOB DUNCAN
AND MR
ANDREW PARR
22 JUNE 2006
Q120 Paul Rowen: And the previous
one did not give you any indication.
Mr Duncan: It did not give any
indication at all.
Q121 Chairman: If the Institute of
Actuaries said—which it did say at a certain point—"Look,
we need to be telling people about the risks here," why were
they not saying to actuaries, "You must tell all the schemes
about the risks"?
Dr Altmann: One can only assume
that they believed it was the Government's responsibility to take
the lead on this. The actuarial profession was required to certify
whether the scheme met the MFR or not. The actuarial profession
was supposed to assess on an ongoing basis whether the scheme
would have enough money to pay the pensions. On the basis of the
assumptions in the MFR, which were approved by the Secretary of
State for Work and Pensions, it was the Secretary of State for
Work and Pensions who signed off on the adequacy or otherwise
of the MFR and the Government consistently said this was adequate,
even though the original policy intention was to ensure that pensions
could be met on wind-up and the Government was warned that this
policy intention was not being adhered to by 1999/2000. I think
there has to be some element of culpability, at least in a moral
sense, on the actuarial profession. Whether individual scheme
actuaries were aware of the 50:50 chance, I do not know, but,
as far as any legal culpability is concerned, they did nothing
wrong. They had to put a note on the accounts which mentioned
that, on wind-up, there might not be enough money, but it was
couched in a way that would not lead anyone to believe that there
was a problem of the kind of magnitude that the priority order
created involved in this whole system. It is the fact that people
can lose an entire life savings and get less than they would have
got if they had never gone near the company scheme and lose their
State Pension equivalent as well that is so dramatic. That I think
the actuarial profession probably felt had severe policy implications
that the Government needed to deal with and were throwing down
the challenge to the Government. The Government actuaries department
did the same. The Ombudsman uncovered evidence that the Government
actuaries department was also suggesting to the Government that
there was a huge risk out there that people were facing and they
did not know. If somebody had done something about it in 1999
or 2000, the worst of these things would not have happened. It
kept failing until 2004 in this dramatic way.
Q122 Kelvin Hopkins: I attended your
very excellent briefing of MPs after the Turner Report, which
I thought was very persuasive. At one point you drew attention
to the vast amount of money in tax relief on savings to the rich.
The annual cost of compensation, even if it all fell on the Government,
would be a tiny fraction of that tax relief, I suspect.
Dr Altmann: Every year we spend
£20 billion on tax relief for pensions—£20 billion
every year—of which over half goes to top-rate taxpayers.
The other thing that I find so striking when I think about the
magnitudes involved in compensating people like these, who did
all the right things, believed and trusted the Government and
did everything we wanted them to do, is that we have just had
a significant reform of pension contributions and tax called A-Day
on 5 April this year, which allows top earners to put vastly more
into their pension with full, top-rate tax relief going forward,
which is going to cost the Treasury probably a few billion pounds
over the course of the next few years, and yet somehow the cost
of £100 million or £150 million a year of righting this
terrible injustice is said to be unaffordable. I just find that
very difficult to get my head round. I am not saying anything
about top-rate tax relief there; I am saying something about the
priorities that seem to be involved in pension policy decisions
and public spending decisions which I find difficult to comprehend.
Q123 Julie Morgan: The Ombudsman
gave us a very convincing case of maladministration, I felt, describing
the pensioners who came in to see her, with the leaflets that
they had used at the time, and I think she produced a compelling
report. As you say, one of the recommendations was that the Government
should find a means of payment. Do you not think that, realistically,
the best, most helpful way of getting money to the pensioners
is to do something more via the Financial Assistance Scheme, despite
all its drawbacks, and the difficulties with it. Do you not think
realistically that that is the most likely way we can get the
Ombudsman's recommendation implemented?
Dr Altmann: I cannot talk about
the politics of this and I think you are asking me a political
question. As far as the realities of the situation are concerned,
a mechanism has been set up to deliver assistance to some of the
people affected. It is not compensation; it is assistance, which
is an issue. But it has been set up in such a way that it has
hardly delivered any help to anybody and it has cost the taxpayer
a huge amount of money. I am not quite clear of the merits of
continuing to run a separate Financial Assistance Scheme when
we already have an infrastructure via the Pension Protection Fund
which could well incorporate payments of this kind, topped up
by government funding. But, if the Government continues to want
to run a separate system, for reasons best understood by itself,
as long as that pays enough money to everybody that is an administrative
question. The real problem with the Financial Assistance Scheme
is this concept of core pension, which has misled everybody into
thinking that it is anything like the expected pension when ultimately
it really will not be—but that is just spin—and the
fact that it is taking so long to get up and running. It is staffed
by people who had no experience in pensions at all when they started
and it has taken a long time to get everything up to speed. I
know there is a Financial Assistance Scheme, but there is also
money sitting there that could be given to people who need it.
The longer we wait for all of these things to happen administratively,
the more people will be left without their pensions when their
money could be given to them now. That is a practical matter.
If the Government will accept maladministration, we can then talk
about the best way of redressing that maladministration and the
consequences of it, but we are not even at that point yet.
Q124 Julie Morgan: I accept that
that was a political question, really seeing what the best way
is for politicians to go on this particular issue. Last weekend,
in Cardiff, I met a group of ASW pensioners and a number of them
had paid into the scheme for 30 years and were not within the
15 years that the Financial Assistance Scheme was offering. I
wondered what comment you would make about the only form of help
that the Government is giving is addressed to people who are nearest
to retirement age. I understand they deliberately made that decision
because they felt it would help people who would be most in need.
What do you think about that logic?
Mr Parr: There is a big injustice
in the way that the FAS is organised, even after the revision
that has just been announced. We know of people at ASW Sheerness
who have only been with the company maybe eight years but are
within the FAS window, whereas a colleague of mine, a very good
friend of mine, is just one month outside the window, he will
get nothing whatsoever, and he has got 25 years' service. On the
other hand, we have senior management who managed to get out,
fortuitously, just before the company went into receivership,
who get their full pension and immediately get another job elsewhere.
The sheer injustice of the way that it operates is appalling.
Q125 Julie Morgan: I do not know
whether you have any comments about the huge emotional strain
and distress that has been caused to pensioners. Certainly in
Cardiff what people were saying at the weekend was absolutely
heartbreaking.
Mr Duncan: As I say, I was 58
when I got made redundant. I was out of work and I thought, "I'm
not going to get much here." I started working for an electrical
wholesaler, just driving round the Midlands. We were making ends
meet, but not a lot, because the missus was just doing part-time
work in a school kitchen and I was getting a couple of bob an
hour for doing this driving. I made the decision, because it was
getting us down a little bit, that if I am going to have no money
I would rather have no money living up North than living down
South. People seem to manage a lot better up North because they
are used to it—and don't say there is not a North/South
divide, because there bloody well is! I am sorry. I took the decision
to sell my house and move into a smaller one, so that at least
I would get a bit of money, but, living in Leicester, the estate
I lived in, it was all white when I moved in, like, but it was
a Muslim estate when I moved off, so for whatever reason, that
kept the price down. So I did not get as much as I thought I was
going to get for my house, but at least I made a little bit from
the house. I bought up in Jarrow. When I went up there, I had
not got a job and the missus had retired. I was on Jobseeker's
Allowance and I thought, "I'm 61, I'm not going to get a
job" but one turned up and I started working for the Royal
Mail. They put us on night shift. Well, I had never worked night
shift in my life. I was loading mail trains up in the middle of
the night. It was pretty heavy work, like, you know, and that
was really making us bad. In the job I worked for, I was an engineer,
I made shoe machines, and I quite enjoyed my job, but this was
getting us down—but it is a job, you know, and you do it.
So they took the mail trains off and they shoved us up at Newcastle
Airport, in the middle of winter, freezing cold, with the wind
coming across the airfield. That was fairly heavy work. Okay,
I have got a job now where I drive. I go to Birmingham every night
from Newcastle. I take my time going down but drive fairly fast
going back—you know, because it is the job finished. It
has not been easy. I am always tired on a weekend. I finish about
two o'clock in the morning on a Saturday morning. By the time
I pull myself together and have had a sleep, it is Sunday morning
and you are getting ready to go back to work again. It has not
been easy. Now I know I am not going to get any pension at all—or
at the moment I am going to get none. Hopefully everything will
be sorted out in the next few years, but, like I say, I have got
10 months to do, and what is going to happen in 10 months' time,
God only knows. I am not a great worrier. It gets us down but
I know there are a lot of people really been made bad by it. I
have seen people. The lad I used to work with, he nearly had a
nervous breakdown. Okay, I have been lucky that way. I worried
once before, when I bought my house in 1968. The interest rate
went up a third of a per cent and I had to find anther £100
in 1968, and that is when I worried. I lost two stone. I said,
from that day onwards: "I won't worry about anything"
and I have not. Okay, say in 10 months' time I will be worried
sick, but it is 10 months' time.
Mr Parr: It affected me in a very
big way. When it all started going wrong in 2002, my heart went
off into atrial fibrillation. I had a couple of jump starts, shocks
on the chest, which brought it back into operation again. But
last year, at the time of the General Election, I was up in Kirkcaldy,
campaigning in Gordon Brown's constituency about the pension issue.
We had somebody from the Pensions Action Group standing against
Gordon. When we came back to Gatwick, I started to feel very,
very peculiar and I pulled up on the edge of the M25 and told
my wife to take over the driving and get me straight to hospital
because I was losing touch with reality. She took me to the nearest
A&E unit, which was Medway Hospital. I had gone into ventricular
tachycardia (which is a very fast heartbeat) and whilst in A&E
I actually had a cardiac arrest. For the General Election last
year I was in the intensive care unit of Medway Hospital. It is
certain that the running around, the pressure and the stress and
the worry of the pension played a major part in that set of circumstances.
Dr Altmann: As I said before,
this is an area which the Government's response has not even started
to address at all. It is assumed that the only problem is financial
losses. That is obviously a big problem, but that leads to these
other problems. The Ombudsman's report about consolatory payments
I think is very relevant.
Q126 Chairman: I think that is probably
how we should end. It is good of you to come along and tell us
particularly the human side as well as the financial side of what
we are talking about. We think we have an obligation as a Committee
to try to do something about this and we will do what we can.
Meanwhile, we are very grateful to you for coming down and giving
us your time this morning. Thank you very much indeed.
Dr Altmann: Thank you for listening.
|
