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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).

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.”

In evidence to the BEIS Committee on 23 March 2021, the MPS trustees said that at privatisation they were essentially, faced with a fait accompli: ‘Take it or leave it. If you want the guarantee, it is 50:50.’(Q3). Payments to the Government had already exceeded the £4bn projected at privatisation by Binder Hamlyn: it had received £4.4 billion and was due to receive a further £1.9bn over the next few years – a total of £6.3 billion (Q7). The trustees said that if the money in the investment reserve was available for distribution to members, it would enable an increase of £14 pw in the average pension (Q28 and 36).

In evidence on 13 April 2021, Minister of State for Business, Energy and Clean Growth, Anne Marie Trevelyan, said she understood that the trustees would still make the same choice today regarding the surplus share in order to have the guarantee. It ensured “no detriment,” inflation-linked annual increases (Q44) and provided “backstop support” to a successful investment policy (Q47). Asked about the proposal to distribute the investment reserve to members, she said this was “the backstop proposition that ensures that the cash is there, should there be a need, in order to support members” (Q55).

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