Row over miners’ pension cash
MINISTERS have defended a deal which gives the Treasury billions of pounds from a pension fund for hard-pressed miners.
Business minister Anne-Marie Trevelyan, the MP for Berwick-upon-Tweed in Northumberland, dismissed calls to give miners a bigger share of the cash.
She was speaking to committee of MPs which is holding an inquiry into the Mineworkers Pension Scheme.
The scheme has 152,000 members, including 135,000 of pensionable age. The current average pension for former miners in the scheme is £84 a week – around £4,386 per year. But the Government has received more than £4bn from the fund, despite paying nothing in – and is set to get more than £1bn more.
The Government has provided a guarantee since 1994 that ensures miners will receive their pensions even if the scheme loses money. In return, it receives half of any surplus if the scheme does well as a result of investments.
But the pension scheme’s investments have performed far better than anyone expected, which means the Treasury has enjoyed a huge windfall.
A number of MPs representing coalfield communities have said the current arrangements are not fair, and have called for an additional £1.1bn to be distributed to pension scheme members.
Speaking to the House of Commons Business, Energy and Industrial Strategy Committee, Ms Trevelyan said her department had not considered changing the scheme, and said the pension fund’s trustees wanted to keep the current arrangements in
place. She said: “My door is always open, as indeed is the Secretary of State’s, to have conversations, but my understanding is that the trustees acknowledge that the guarantee does enable them to invest, to target higher returns, which would be too risky to do if they didn’t have that guarantee.
“And therefore that position is one they are content to remain with at the moment.
“But conversations are always possible.”
She said the Government guarantee had allowed the pension fund’s trustees to take more risks with investments, which had led to higher returns.
But Sedgefield MP Paul Howell, a member of the committee, told Ms Trevelyan that while the fund’s trustees accepted the need for the Government guarantee, they felt that the 50-50 split was not fair.
The current arrangements go back to 1994, when British Coal was privatised.
The Government guaranteed that members of the Mineworkers Pension Scheme would receive the same benefits they had earned up to privatisation, adjusted in line with inflation. Half of the surplus in the scheme was used to increase members’ pensions, while the other half was held in reserve to be used if the pension fund fell into deficit.
However, the reserve money could be transferred to the Government over time, if it turned out not to be needed.
In addition, any future surpluses from the scheme were to be shared between the Government and pension scheme members, with 50% used to increase benefits for pensioners and 50% going to the Government.
But this turned out to be a far more generous deal for the Government than anyone expected at the time.
By October 2020, the Government had received £3.4bn as its share of the surpluses. In addition, £1.3bn had been returned to it from the reserve fund.
And there is currently £1.1bn still in reserve, which is set to go to the Government
A letter signed by 45 MPs in December last year said: “We believe that a fairer agreement could be reached to ensure that a higher proportion of any surplus goes to the miners themselves.”
They said the £1.1bn “could provide a direct and almost immediate financial uplift to many retired miners’ pensions, providing greater financial security for them and their families.”
Those signing the letter included Wansbeck MP Ian Lavery; Easington MP Grahame Morris; City of Durham MP Mary Foy; Washington and Sunderland West MP Sharon Hodgson; South Shields MP Emma Lewell-Buck; Gateshead MP Ian Mearns; Jarrow MP Kate Osborne; Sunderland Central MP Julie Elliott, and North Tyneside MP Mary Glindon.