Fifty-Seventh Report - AEA Technology Pension Case

AEAT pension scheme members have been passed from one part of government to another, with no department taking overall responsibility for their complaints. Scheme members have raised complaints with government since 2012 covering a range of issues that involve several … Read more AEAT pension scheme members have been passed from one part of government to another, with no department taking overall responsibility for their complaints. Scheme members have raised complaints with government since 2012 covering a range of issues that involve several government organisations, including departments and regulators. The Department for Work & Pensions (DWP) initially responded in 2013 on behalf of government by providing a factsheet, which summarised the complaints received and the government’s position on each. Six months later, after members were dissatisfied with the response, DWP wrote to them again saying it was not responsible for the case and directing them elsewhere. DWP had to subsequently apologise for the fact that its factsheet added to the confusion over who was responsible for what. Responsibilities for pensions are spread across government, with different departments responsible for private and public sector pensions. The lack of joined-up thinking on pensions allowed the issue to fall between the cracks. Government has not commissioned any independent review into the complaints raised by AEAT members, and all of the relevant ombudsman services have said they cannot investigate the information government provided in 1996. Recommendation 2: The government should ensure that members’ complaints about the AEAT pension case can be independently reviewed, for example by a relevant ombudsman. Show less

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The AEAT case shows that there are gaps in the routes of appeal available for people raising complaints about their pensions. It is a fundamental right that 6 AEA Technology Pension Case people have appropriate and accessible routes of appeal. … Read more The AEAT case shows that there are gaps in the routes of appeal available for people raising complaints about their pensions. It is a fundamental right that 6 AEA Technology Pension Case people have appropriate and accessible routes of appeal. Ombudsman services provide a way for people to seek independent review of their complaints without the cost of pursuing action through the courts. In this case, ombudsman services such as the Pensions Ombudsman and the Parliamentary and Health Service Ombudsman (PHSO) ruled that they could not examine key complaints raised by AEAT pension scheme members because the complaints fall outside their statutory jurisdictions. For example, PHSO is unable to look into employment matters, including specifically those relating superannuation and pensions, due to its remit. Legislative amendments would be required to change this. Some aspects may have been within the remit of the Pensions Ombudsman but, because the case was more than 15 years old, the ombudsman would have been unable to award any remedy due to the Limitation Act 1980. Government protocols for retaining data may also often prevent relevant information being maintained for long enough to be reviewed in cases involving pensions. Pensions are long-term financial products, and problems can take many years to become apparent. Recommendations 3: The government should review ombudsman arrangements to ensure that all aspects of people’s interactions with their pensions have an adequate route of appeal. We also ask that the Public Administration and Constitutional Affairs Committee consider examining whether the current time limits on government for retaining information and ombudsmen awarding redress are fit for purpose when it comes to pensions. Show less

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This is another case of government not giving people enough time or support to make complex financial decisions. The government has a role to help people make good financial decisions, because of the detriment that bad choices can lead to. … Read more This is another case of government not giving people enough time or support to make complex financial decisions. The government has a role to help people make good financial decisions, because of the detriment that bad choices can lead to. In the case of AEAT, it should have done this directly. This was a complex financial decision where members needed clear information on their options and time to seek appropriate financial advice. AEAT scheme members were only given one month to decide between their pension transfer options, and the information they received was insufficient. We have seen similar issues in other areas, including in the private sector where government oversees the regulation of independent financial advice. For example, our inquiry last year into the British Steel Pension Scheme covered the significant financial harm that many scheme members suffered from transferring their pensions after receiving unsuitable advice. We concluded that the regulatory system had left members open to being taken advantage of and that, seven years after the Pension Schemes Act 2015, regulated financial advisers were still not clear on what was expected of them. DWP is developing several initiatives aimed at supporting people to engage with their pensions, such as ‘Pensions Dashboards’ and a recent call for evidence on the support and information people need when accessing their pensions. However, it is not clear when these initiatives might come to fruition and lead to tangible improvements. Recommendation 4: The government should write to us within three months to set out what more it will do to support people to make informed financial decisions, including regarding their pensions. This should include what changes it will make in light of DWP’s recent call for evidence, and an update on progress with Pensions Dashboards. AEA Technology Pension Case 7 1 AEA Technology pensions Show less

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On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Work & Pensions (DWP), the Government Actuary’s Department (GAD) and the Parliamentary and Health Service Ombudsman (PHSO) on the pensions transferred to AEA Technology (AEAT) when it was privatised.1

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When the Atomic Energy Authority Act 1995 was introduced to facilitate the privatisation of AEAT and outline the pension arrangements, it required that the pension benefits in the new AEAT scheme must be “no less favourable” than the previous scheme. Around that time, other privatisations had included government guarantees on …

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None of the information government provided to scheme members told them the government guarantee would be lost if they transferred their accrued benefits into the new pension scheme.7 We asked GAD why members were not told this, and whether the note it had provided at the time was therefore misleading. …

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GAD’s note suggested that scheme members seek independent financial advice if they were unsure of the most suitable course of action.10 We asked GAD whether it was realistic for scheme members to get independent financial advice, particularly when GAD is a well-recognised authority on public sector pensions and members were …

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Since the scheme entered the PPF, members have lost money in real terms each year because the compensation they receive does not include rises for inflation. PPF compensation initially provides members 100% of their pension if they had already reached the scheme’s normal pension age, or 90% for those who …

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From 2012 onwards, scheme members raised a series of complaints with multiple government organisations and were dissatisfied with the responses they received. In July 2013, DWP produced a factsheet summarising the complaints government had received and a response to each on behalf of the government. In February 2014, it then …

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When we asked it why no part of government had taken responsibility for the issue, DWP described pensions policy as a complex and wide-ranging area which touches on a number of departments. DWP is responsible for private sector pensions rather than public sector pensions, which it told us are the …

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Government has not commissioned any independent review into the complaints raised by AEAT members, and all of the relevant ombudsman services have said they cannot investigate the information government provided in 1996.19 PHSO told us it is unable to investigate personnel and superannuation matters, and that this would require a …

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We asked how government can ensure that, if a similar thing were to happen again, pensioners making complaints would not be shunted from pillar to post in trying to make appeals and getting no advice or satisfaction. DWP told us that the government’s Fair Deal policy introduced in 2013 means …

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It is a fundamental right that people should have appropriate and accessible routes of appeal. Actions by government bodies are in principle subject to judicial review through the courts, but this is an expensive process.25 Ombudsman services provide a way for people to seek independent review of their complaints without …

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In the case of the AEAT pension scheme, relevant ombudsman services said they were unable to properly investigate key aspects of scheme members complaints.27 Some aspects of the case could be reviewed. For example, GAD described to us how complaints about work done by individual actuaries who are members of …

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PHSO described to us the gaps in its remit which prevent it from providing pension scheme members with a route to appeal in this case or in similar situations. PHSO explained that its jurisdiction only allows it to investigate GAD on a very specific point about insurance companies during a …

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The Pensions Ombudsman may also be a suitable body to investigate the administration and management of pension schemes, as it is the expert in government for investigating pensions complaints.32 However, it has no remit over the role of GAD in providing information to scheme members. The Pensions Ombudsman could in …

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The AEAT case is one where government directly provided information intended to help pension scheme members decide what to do with their accrued pension benefits. Members were only given one month to make the decision, and consider that the information provided was insufficient and misleading.36 GAD acknowledged that in the …

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This committee has previously found similar issues with how government provides or oversees support for people making complex or long-term financial decisions, including through the regulation of independent financial advice. Most recently, our inquiry last year into the British Steel pension scheme found that pensions regulators had failed to provide …

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This committee’s 2016 report on financial services mis-selling similarly concluded that the Financial Conduct Authority was not doing enough to ensure that consumers understand the financial products they are buying. The report found that even the most knowledgeable consumers can find financial services too complex to understand, which emphasises the …

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We asked DWP how government can ensure it gives clearer and more accessible financial advice in similar situations in future. DWP told us that changes to policy on privatisations and transfers of pensions meant that the specific circumstances affecting 33 Qq 50–51; C&AG’s Report, paras 3.10–3.11 34 Qq 44, 51 …

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