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On privatisation of British Coal in 1994, an arrangement was made between the Government and the trustees of the Mineworkers Pension Scheme (MPS) on future arrangements for pensions after privatisation. Key elements of this were that:

  • The MPS was closed to further contributions.
  • A government guarantee meant that scheme members would always receive the benefits they had earned up to privatisation, increased in line with inflation.
  • 50% of the surplus in the scheme at privatisation was used to enhance members’ pensions immediately. The other 50% was put in an Investment Reserve, to be called on should a deficit arise. To the extent that these funds are not needed to maintain benefits, they are to be transferred to the government over time.
  • Scheme members and the government would receive equal shares of any distributable surpluses from valuations after 31 March 1994. The members’ 50% may be used to improve benefits. (HC Deb 27 April 1994 c167-9W).

The decision to share the surplus 50:50 was “agreed between the Government, in its role as Guarantor, and the Scheme Trustees,” rather than being based on actuarial advice (PQ128727, 26 February 2018). The National Audit Office said the guarantee would be of significant reassurance to pensioners (HC 360 1995-96).

In the 2000s, the Coalfield Communities Campaign argued for a review of the surplus-sharing arrangements, arguing that the guarantee had been struck on actuarial advice which, with hindsight, may have been too cautious and that a “50% share of an unexpectedly large surplus is too much.” The Labour Government looked again at the arrangements but decided that, against the background of large falls in stock markets, it would not be right to change the arrangements (HC Deb 7 March 2003, cc 1278-9W).

By October 2020, the Government had received £3.4 bn as its share of the surpluses (PQ 99079, 8 October 2020). In addition, £1.3bn had been returned to it from the Investment Reserve (PQ 190420 15 November 2018).

As at 30 September 2020, the Investment Reserve stood at £1.2bn (PQ 102149 15 October 2020). These funds, to the extent that they are not required to maintain benefits, are to be transferred to the Government by 2029 (MPS Annual Report and Accounts 2019).

On 23 December 2020, a group of MPs representing coalfield communities wrote to the chair of the Business Energy and Industrial Strategy Select Committee calling for an inquiry into the issue. They drew attention to the fact that the average pension for former miners in the Scheme is £84 pw and that the Government had received over £4 bn from the scheme but made no contribution to it since 1994. They argued that funds remaining in the Investment Reserve should be used to “provide a direct and almost immediate financial uplift to many retired miners’ pensions, providing greater financial security for them and their families.”

The Government said it had reconsidered the surplus sharing arrangements of the Mineworkers’ Pension Scheme (MPS) and concluded that they remained appropriate (PQ130263, 23 December 2020).  It argues that its surplus share is in return for the government guarantee that ensures that “a member’s guaranteed pension, including inflation increases, will always be paid; and a member’s total pension (including bonus pension) will not fall in cash terms.” This has enabled an investment strategy that has resulted in scheme members receiving payments 33% higher than they would have been if they received only their actual earned pension up to privatisation. In November 2019, it agreed to a proposal by the MPS Trustees to guarantee that bonus pensions already accrued would not be lost in the event of a future deficit (Letter from Kwasi Kwarteng to Rachel Reeves MP, 21 April 2020).

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