Green

Paper quotes which mislead people into believing their employer’s

pension is safe.

by Dr. Ros Altmann

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The

following are quotes from the Government’s recent Pensions Green

Paper.  They all indicate that the officials who wrote the

Paper do not realise that our pensions law does NOT protect

pensions.  The quotes are highly misleading, and would suggest

to people who belong to their employer’s final salary scheme that

their pension rights are safe.  In fact, if their employer

becomes insolvent, they could lose all their pension (even in a

scheme which was 100% funded at its last MFR valuation) and if the

employer winds up the scheme while continuing in business, the

current rules allow the employer to get away with paying only a

fraction (often less than 40%) of the promised pension.  This

situation undermines the whole of our pension system, will erode

confidence if left unchecked and must be addressed as soon as

possible. 

1. 

Phrases which lead people to believe that their pension rights are

protected by law: 

‘People

should be able to have confidence in the pension they have been

promised’ – Ian McCartney Foreword p.4 

‘Legislation

is there for a reason – to protect the pension rights of members. 

We need to ensure that while simplifying the regulatory regime, we

maintain consumer protection, trust and confidence’  p. 54 

‘Accrued

rights…are clearly protected under pensions legislation and this

will remain the case’ – p.55 Technical paper 

It

is important ‘to provide the stability and confidence that is so

important and which members of pension schemes are entitled to

expect.’ – p.30 Technical Annex 

‘It

is clearly important that employers continue to honour their pension

promise in relation to the rights that members have already

accrued’. – p.30 Technical paper 

2. 

Quotes which show that people are better off working for an employer

who breaks the law, or is dishonest, because then their pensions are

protected!  Why should pensions be protected when employers act

illegally, but not when they act legally?

‘People

need to be protected against dishonesty’ p.51 

‘Propose

to remove restrictions so that schemes with an insolvent employer

can be compensated for the full amount lost as a result of acts of

dishonesty’ – p.51 

3. 

Government tries to blame employers, but it is the legal framework

which has allowed people to believe they are protected.  Even a

scheme which is fully funded on the MFR can leave its members with

no pension.  The employer will not have let their employees

down if the funding level plunges due to market movements, but the

law divides up the assets in an unfair way, so pensioners are fully

protected and everyone else is not. 

‘Employers

have let their employees down when they have become insolvent with

an underfunded pension scheme’ p.2 

4. 

Quote showing why the Government seems to have been afraid to

actually protect pensions.  They are frightened of forcing

employers to pay more.  But surely, if employers cannot afford

the promises they have made, the members should be told! 

Government

‘will be guided by the aim of not increasing the overall burden on

employers providing pensions’ – p.67 

5. 

Quote showing that Government may need to accept some responsibility

for compensating those who have lost their pensions as a result of

the lack of protection in law.  The situation is similar to the

mis-selling of personal pensions, wherein financial services

companies were forced to spend billions of pounds compensating those

who lost out by transferring their pension due to poor advice. 

Government encouraged (even bribed with tax relief) people to put

their money into their employer’s pension and then prevented them

from diversifying into any other scheme.  Government knew

people believed their pension was safe, yet did nothing to warn

people that this was not in fact the case. 

‘Government’s

aim throughout has been to ensure that victims of mis-selling

received redress as rapidly as possible… If a pension was mis-sold,

and a loss incurred as a result, the firm must offer redress to

restore their customer’s financial position’ – p.80