Former Pensions Minister Richard Harrington has restated that the government’s position on the surplus sharing arrangement of the Mineworkers’ Pension Scheme has not changed.
Taking part in a House of Commons debate, yesterday, 5 December, acting in his new role of Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy, Harrington said the government believes the current situation is “fair”.
The dispute relates to the government guarantee that was put in place on 31 October 1994, the day the scheme was changed to reflect the impact of the privatisation of the coal industry. It is a legally binding contract between the trustees and the government.
In addition to ensuring benefits earned up to privatisation, and that benefit improvements from surpluses before 1994 will always be paid and keep their real value, the guarantee provides protection to ensure that the total pension is not reduced in cash terms each year.
Under the arrangement, 50 per cent of any surplus after 1994 is made available to provide bonuses for scheme members, with the remaining 50 per cent going to the government. However, campaigners believe that the 50:50 split is unfair and the government has “robbed” members of pension benefits, as bonuses are paid out with the surplus.
Fellow Conservative, the Mansfield MP Ben Bradley, who has constituents that are members of the scheme urged the government to consider the profit-sharing model in line with the scheme’s success. Since 1994 the scheme has always been in surplus, with the government never having to pay any money into the scheme; as a result of the deal, the government has earned £3.5bn from the scheme.
Defending the deal, Harrington said that the government has also contributed a lot to the scheme, and that the guarantee provided is more than just technical, as he described is as a “golden guarantee”.
“I ask the House please not to think that I am saying it is not, but it is more than just technical. The fact that the guarantee has not been called on may make it look far less important than it is. I want hon. members and others who listen to the debate to know that a lot of successful investments were made because the trustees have had the security of the knowledge that the government are standing by.”
He reiterated several times the notion that it has been the government’s guarantee that has allowed the trustees of the scheme to make riskier investment decisions, which has led to the success of the scheme.
“The scheme in question has been a success, and I would argue, and I think the trustees would agree, that it is the guarantee that made that possible. All the other pension funds—I dealt with quite a few in my previous job—buy very low-risk government bonds, all the time. They do it because of fear; obviously, they have got to pay money out.
"With their fiduciary duty they cannot risk it. That is one of the reasons why British pension funds do not invest in infrastructure and similar things as much as we would like. They cannot risk the pensioners’ money, because of the need for returns. A guarantee on all pension funds would transform the whole pensions industry, but of course the government would then have a contingent liability of I do not know how many billions,” he said.