Pensions Minister Richard Harrington has reaffirmed that the government does not believe it should compensate members of the AEA Technology pension scheme.

Speaking in a debate in the House of Commons yesterday, 26 October, Harrington was responding to calls from other MPs for action to be taken. It relates back to 1996 when the UK Atomic Energy Authority was privatised and become known as AEA Technology.

At the time, employees belonged to a government backed pension-scheme, however, upon privatisation, they were given the opportunity to remain in the existing scheme or transfer to the AEA Technology pension scheme.

In 2012, AEA Technology entered into administration and the AEA Technology pension scheme fell into the Pension Protection Fund with some 3,000 pensioners affected. The criticism is that, in 1996, the Government’s Actuaries Department (GAD) provided employees at the time with a note as to guidance for what to do, but did not include information relating to the risk of moving into the AEA Technology pension scheme.

The debate was motioned by Conservative MP Oliver Letwin who has constituents that have been impacted by the scheme falling into the Pension Protection Fund. He said that nowhere in the document sent out by GAD, does it state that, “the risk of the pensioners losing a large part of the value of their pensions if they remained with their accrued rights in the UKAEA scheme was zero, or as near to zero as human beings get”.

“A triple A-rated guarantee from HM government attended that scheme. No such security was available under the AEA Technology scheme. Commercially-backed schemes do not have a triple A-rated government-backed guarantee that pensioners will get their money as promised. That is a material difference between the two schemes, and GAD, in offering advice to pensioners, had a clear duty to bring out that difference in risk.”

Labour Shadow Pensions Minister Alex Cunningham also noted that pension benefits accrued before 1997, which would have been for all those who acted on the basis of the government’s original commitment in the 1995 legislation, are not eligible for index-linked uprating.

“That is why pensioners believe they have been misled and, as a result, will be worse off. In effect, that means that those scheme members who decided to transfer their pensions following advice that their benefits would be “no less favourable” back in 1995 suddenly find themselves with a smaller pot, the real value of which is eroded by inflation every year. The campaign estimates that some members could lose half their pension pot.”

Letwin sees this as “maladministration” on GAD’s part and believes the pensioners should be compensated by the government and the parliamentary or pensions ombudsman should be able to rule on the case. However, investigating GAD falls outside the remit of both ombudsmans.

“It is arguably clear that that is maladministration that the parliamentary and health service ombudsmen should be able to adjudicate on. It would require only a small amendment to section 4(1) of the Parliamentary Commissioner Act 1967 in the forthcoming parliamentary ombudsman Bill to remedy that. We would then be able to go back to the ombudsman and say, “Now you have the power to look at what the Government Actuary’s Department did, whether it constituted maladministration and whether in your view that maladministration was material in having an effect on the pensioners, the choices they made, and hence the losses they incurred,” Letwin said.

“Then, as with Equitable Life—I threatened to go on hunger strike if the then government did not bring in the ombudsman and agree to follow its ruling—it would be possible to introduce a scheme with compensation proportionate to the extent to which the losses to the pensioners were caused by the maladministration.”

However, in response, Harrington argued that GAD’s note did not count as official advice and therefore cannot be held accountable for the actions taken by the members.

“I would rather not be grey about it; that is the government’s position. We do not accept that the loss of the pensions was the government’s fault,” he said.

“The note specifically and explicitly said that it did not intend to suggest that one course of action was better than another, and that if anyone was in doubt, they should seek independent financial advice.”

In relation to the issue of the ombudsman, Harrington acknowledged that GAD “generally falls outside of the parliamentary ombudsman’s remit”. However, he said the ombudsman also declined to investigate the case because the complaints were not about the actions of a government department in relation to a citizen, which is what the ombudsman service is for.

“The complaints are about information provided in relation to employees and employees’ pension rights. That is why it is not the concern of the parliamentary ombudsman. If that is a correct interpretation of her opinion, changing the legislation to allow her office to have greater oversight of GAD would not solve the difficulty raised in this debate,” he stated.

However, he added that the government has announced its intention to bring forward a draft Bill to create a new public service ombudsman, the focus of which remains the resolution of complaints from individual citizens who claim to have suffered injustice. He said the government is willing to listen as to whether GAD should come under this.

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