Press Release welcoming Parliamentary Ombudsman report

by Dr. Ros Altmann

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GORDON BROWN’S BIG TEST:  IS HE FIT TO BE LEADER?  WE CALL ON HIM TO RIGHT THIS WRONG IMMEDIATELY

PARLIAMENTARY OMBUDSMAN REPORT FINDS GOVERNMENT GUILTY AND RECOMMENDS FULL RESTORATION OF ALL LOST PENSIONS PLUS DAMAGES FOR THE STRESS AND SUFFERING CAUSED BY GOVERNMENT’S REFUSAL TO ADMIT ITS RESPONSIBILITY – HEADLINE COST COULD BE £5-£10BILLION BUT CAN BE PAID OVER 40 YEARS AT AROUND £100-£150MILLION A YEAR

I attach three papers to help understand the contents of the Parliamentary Ombudsman’s report.  

Summary:

I call on Gordon Brown to accept the findings of this independent report, admit to mistakes that he has made on pensions policy and demonstrate whether he has the leadership qualities necessary to tackle a national crisis.  An independent verdict says the Government is guilty of betraying 85000 families – innocent victims of broken promises and a betrayal of trust. 

If the Chancellor decides to continue to defy Parliament’s own Ombudsman, then we hope the House of Commons and all duly elected Members of Parliament will hold Government to account for its actions.  If our Parliamentary democracy is to mean anything, then justice must be done here.

There are so many dreadful indictments of Government in this Report that it is hard to know which to single out.  The basic message that comes through loud and clear is that Government says one thing, that it thinks will sound good to the public, but then does something different in practice, without telling people that it is not actually doing what it said it was.   I would point to the following in particular, but read the report and judge for yourself:

1. The MFR was only originally designed to give a 50/50 chance of full pensions, but Parliament and the public were never told this!
2. The Government decided members needed to believe their pensions were secure, and it should help employers fund pensions as cheaply as possible, so it decided to tell members their pensions were safe, even though they were not.
3. Government told the public it was issuing information to help them understand the most important issues about pensions from a source they could trust, but then betrayed that trust by not including the most important information about lack of security
4. Ministers misled Parliament over their handling of member security
5. The FSA believes that there is more than one meaning of the word ‘guarantee’ and that it does not necessarily mean ‘guarantee’ as everyone else knows it!
6. When faced with the consequences of its own actions, Government tried to blame everyone else and fails to accept its own responsibility
7. The decent ‘silent majority’ of good people in this country, who trust their Government, believe official information, try to do what they are told and look after themselves and their families have been betrayed
8. While Government and officials were increasing their own pensions, they were reducing the security of final salary schemes for everyone else, but decided not to tell members the truth.

I welcome this report, but with great sadness that many of those affected did not live to read it.  It has been several years since the victims of this social injustice first discovered they had lost most or all of the company pension they had contributed to and which Government had led them to believe was safe and protected by law.  The experience of losing one’s entire retirement income and the uncertainty hanging over these individuals and their families is impossible to over-estimate.  They have been utterly betrayed by Government.

At last, an independent investigation has highlighted clearly, for all to see, the gravity of the injustice  they have suffered.  Having been brushed aside and fobbed off by Government for so long, the complainants had almost lost faith in justice .  It is to be hoped, therefore, that our Parliamentary democracy does have a mechanism for forcing Governments to face the consequences of their actions, if Ministers and officials are unable, themselves, to appreciate the injustices they are responsible for.  We call on Gordon Brown to carefully consider the evidence and findings of this report and immediately agree to rescue these 85,000 innocent victims.  If the Chancellor will not accept this, I hope that the House of Commons will hold the Government properly to account.

The Parliamentary Ombudsman has uncovered the full extent of this injustice, and I hope that all Members of Parliament will recognise immediately that they have a duty to ensure pensions are replaced in full.  These people have suffered more than enough – it is time they received an apology and full restoration of what has been lawfully taken away from them and what they were always told was actually ‘protected’ by the law.

These individuals have done nothing wrong.  Their lives have been devastated by the carelessness of Government and their mistake was that they genuinely believed Government would tell them the truth.  It beggars belief that Government is now saying that the members either have lied about actually reading and relying on the official information and leaflets or that, if they did read them, of course they should never have believed what they read!

We as a nation should be ashamed of how our Government is behaving on this issue.  Gordon Brown has the power to sort this out and we call on him to do so immediately.  MPs and officials need to consider carefully the findings of this report, and hopefully take on board the important messages that it highlights.

‘Informed choice’ has been at the heart of the Government’s pension reform agenda, but if it then takes it upon itself to inform citizens, it must do so honestly, clearly and transparently, rather than trying to hide the truth in order to fulfil its own agenda or please wider interest groups.    The Government has also claimed that its policy agenda is based on fairness, social justice and personal responsibility.  If those who did indeed take personal responsibility for their future are left high and dry after being lulled into a false sense of security by Government, then the public will be unable to trust official assurances in future. 

The Parliamentary Ombudsman investigation is an independent verdict on the Government’s handling of occupational pensions in the UK.  Government cannot simply decide it does not like the findings.  This is Parliament’s own Ombudsman, set up to monitor the behaviour of Government and her findings cannot be ignored.  All MPs must take this report seriously.

The findings are a damning indictment of the manner in which Governments have overseen final salary pension schemes.  She has found that members of these schemes were led to believe their retirement income was secure and were encouraged to join or remain in their scheme by untrue assurances of protection.  Government policy deliberately wanted to encourage membership of occupational schemes, Government knew that members would not join unless they thought their pensions were secure, so Government decided to tell them they were safe, even though it actually knew that they weren’t.

Some of the most damning findings are as follows (but there are many more!)

MFR WAS DESIGNED ONLY TO PROVIDE A 50/50 CHANCE OF FULL PENSION!
After the 1995 Pensions Act and the introduction of the Minimum Funding Requirement (MFR),  Parliament and the public were told that this Minimum Funding Requirement would be designed to protect accrued pension rights.  What the Parliamentary Ombudsman has uncovered, however, is that the MFR was actually only designed to give non-pensioner members a 50/50 chance of getting their full pension!  How would Ministers and civil servants feel if they had only a 50% chance of getting their pensions?  Would they call them secure and safe?

GOVERNMENT DECIDED NOT TO WARN MEMBERS THAT THEY COULD LOSE THEIR PENSIONS IF THEIR SCHEME WOUND UP
Even after warnings from the Actuarial Profession that members should be told the truth, Government still decided not to warn members.  In fact, officials specifically mentioned that disclosing the true risks to members would alert the public to the fact that the MFR was not actually designed to protect pensions fully!

GOVERNMENT WEAKENED THE MFR TWICE BUT DID NOT FOLLOW ACTUARIAL ADVICE TO STRENGTHEN IT
Malcolm Wicks misled the House of Commons by suggesting that the Government had weakened the MFR because it believed it is right to follow the advice of the Actuarial Profession, but he failed to mention to the house that Government had not followed the two occasions when the profession advised Government to strengthen the MFR.

WAS GOVERNMENT MORE CONCERNED ABOUT CONTROLLING COSTS TO THE TREASURY THAN ENSURING MEMBER SECURITY?
The reason the Government chose not to follow the advice to strengthen the MFR may have been because officials were afraid this might lead to calls for increases in contracting out rebates and the Treasury had not agreed to this.

GOVERNMENT KNEW THAT PENSIONS WERE NOT PROPERLY PROTECTED BUT DECIDED NOT TO WARN MEMBERS BECAUSE IT WANTED TO ENCOURAGE MEMBERSHIP OF OCCUPATIONAL SCHEMES
The Government had a policy objective of increasing private pension coverage and its pensions and savings policy was driven by a principle of ‘informed choice’.  It undertook to issue public leaflets and information to help people make these choices, but decided not to give them all the information they actually needed.  Government decided to give partial information, only explaining the benefits and not the risks.

THE FINANCIAL ASSISTANCE SCHEME HAS COMPOUNDED THE INJUSTICES AND GOVERNMENT NEEDS TO CHANGE IT URGENTLY
The Parliamentary Ombudsman report warns that she has considered complaints about the Financial Assistance Scheme and believes it contains further injustices which need to be remedied.

THE FSA SEEMS TO BELIEVE THAT THERE IS MORE THAN ONE DEFINTION OF THE WORD GUARANTEE.  Apparently, when the FSA uses the term ‘guaranteed’ to refer to something that is not truly guaranteed at all, it is using the ‘lay’ definition of the word.  The financial services industry and financial advisers need to take careful note of this!

Gordon Brown must agree to sort this out now.  Pay everyone the pensions they were relying on and which Government told them were secure and guaranteed.  Then maybe we can get on with restoring some confidence in pensions and sorting out the mess surrounding pensions policy for the future.