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Select committee: Business, Innovation, Science and Trade Committee

Mineworkers' Pension Scheme

Closed Opened 18 Mar 2021 Closed 27 Sep 2021 6 recommendations 12 conclusions

Business, Innovation, Science and Trade Committee Inquiry on parliament.uk ↗

Inquiry scope (the committee's words)
The BEIS Committee is holding a short inquiry into the Mineworkers' Pension Scheme, and in particular the Scheme’s surplus sharing arrangements. When British Coal was privatised in 1994, an agreement was made between the Government and the Trustees of the Mineworkers Pension Scheme (MPS) on future arrangements for pensions. The Government guaranteed that pensioners would always receive the benefits they had earned up to privatisation, and that these benefits would increase in line with inflation. However, in return for this guarantee, the Government is also entitled to receive 50% of any surplus in the Scheme’s value at subsequent valuations (to the extent that these funds are not needed to maintain benefits). The remaining 50% of the surplus is to be distributed to pensioners through improved benefits. The Government has maintained that this arrangement works well. 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 surplus sharing arrangements. The letter highlights that the Government has received over £4 billion from the scheme, but has made no contribution to it since 1994. The BEIS Committee will inquire into how the surplus-sharing arrangements were agreed, the Government's role as Guarantor of the Scheme, and the continued appropriateness of the 50:50 split. The Committee welcomes evidence submissions from organisations and individuals with views on the Mineworkers' Pension Scheme, and in particular from retired miners and beneficiaries of the Scheme.

Where it stands

The inquiry is closed, opened 18 March 2021.

The committee has published 1 report, most recently Sixth Report - Mineworkers’ Pension Scheme on 29 April 2021.

The government's response

Published 5 July 2021. The deadline was 29 June 2021.

Summary written by Accountability Index from the government's response. It is not the government's own words.

The Government states it is "unable to agree to the Committee's recommendations" and continues to believe the 1994 arrangement "was fair and beneficial to both Scheme members and taxpayers".

  • It does not accept that it has benefitted unduly, saying the arrangements "have been a success and benefitted all parties".
  • It does not accept that the Trustees had no choice in 1994, noting they "could have declined the offer of the guarantee at that time".
  • On changing the terms, it says BEIS Ministers "would be happy to have that discussion" if the Trustees want to leave the guarantee arrangements, but notes the Trustees have indicated the guarantee is worth more than the share of surpluses.
  • It is "happy to consider ways to improve benefits", but says this "has to be weighed against the risks to taxpayers". It states that receipts go to the Exchequer and were never intended to be ringfenced for members or coalfield communities.

Read the government's response ↗ Report an error

Recommendations and conclusions

All 18 recommendations and conclusions

Reports

All reports

Evidence

  • 2 oral evidence sessionsLatest 13 April 2021
  • 7 witnesses
All evidence

Recent activity

Recommendations and conclusions 18 shown

Conclusion 1

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
The Scheme’s Trustees had little choice but to accept the Government’s proposal to divide future surpluses on a 50:50 basis, as a condition of securing the Government’s guarantee during the negotiations in 1994.

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Conclusion 2

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
The Government failed to conduct due diligence during the 1994 negotiations and undertook no empirical analysis or evaluation to inform or support the 50:50 split it proposed. The Government was negligent not to take actuarial advice.

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Conclusion 3

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
The 50:50 split was, and remains, arbitrary.

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Conclusion 4

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
To date, the Government has received £4.4bn from the Mineworkers’ Pension Scheme. This is already more than the 1994 expectations of what the Government would receive. The Government is also due to receive at least another £1.9bn, on top of 50% off any future surpluses.

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Conclusion 5

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
The Government has not paid any funds into the Scheme since the surplus sharing arrangement was put in place in 1994.

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Conclusion 6

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
Many former mineworkers have chronic health issues directly related to their former occupation, and the former coalfields are amongst the most deprived areas of the UK. Sadly, their numbers are also decreasing year by year. Over half of Scheme members receive less than the average pension. Given the success of the Scheme, and the vast sums which have been paid to the Government, it is unconscionable that many of the Scheme’s beneficiaries are struggling to make ends meet.

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Conclusion 7

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
We recognise that the Government’s guarantee is important, has contributed to the success of the Scheme, and has benefitted Scheme members. However, we are not convinced by the Government’s argument that its entitlement to 50% of surpluses is proportionate to the relatively low degree of risk it actually faces in practice. The number of Scheme members and the relative size of the fund has fallen significantly since 1994. Yet, the Government’s ‘price’ for the guarantee has not been adjusted to reflect that fact. With no formal period review mechanism built into the agreement, pension members remain tied to an expensive arrangement.

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Conclusion 8

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
Given that the Scheme has continued to produce strong returns despite the 2008 Financial Crisis and the COVID-19 pandemic, there is little reason to believe the Government will be required to pay into the Scheme before it is wound-up. Even if, in extremis, the Government is required to financially contribute at some point in the future, realistically its contribution will not come close to the (at least) £6.3bn it is currently due to receive in total.

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Conclusion 9

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
Whether or not the Government knew in 1994 that it would disproportionately benefit from the arrangement, and whether all parties thought it was fair at the time, 24 Mineworkers’ Pension Scheme is irrelevant. It is patently clear today that the arrangements have unduly benefited the Government, and it is untenable for the Government to continue to argue that the arrangements remain fair.

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Conclusion 10

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
Governments should not be in the business of profiting from mineworkers’ pensions. We are therefore disappointed by the Government’s argument that the 1994 agreement is a success because the public purse has had strong returns from it. The Government is not a corporate entity driven by profit-motives, and should not view miners’ pensions as an opportunity to derive income. We also note that allowing the arrangement to continue would appear antithetical to the Government’s stated aim of redressing socio-economic inequality and ‘levelling up’ left-behind communities.

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Recommendation 11

Recommendation · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Recommended (the committee's words)
The Government is disingenuous in claiming the Trustees are content with the terms of the current arrangements. The Trustees have been clear that they are not - and never were - happy with the terms, and that they would welcome any changes in members’ favours. The Government should not mistake the Trustees’ acceptance of the deal for contentment.

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Recommendation 12

Recommendation · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Recommended (the committee's words)
We are disappointed by the Government’s dismissive approach to proposals to review the existing arrangement. The Minister’s claim of openness is contrary to the approach successive governments have taken since 1994. The Government must approach any future discussions with the Trustees with a genuinely open mind, and with the best interests of the pension members in mind.

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Recommendation 13

Recommendation · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Recommended (the committee's words)
With the benefit of hindsight, it is clear that the Government has already profited greatly from the Scheme. The Government must acknowledge that continuation of the arrangements in their current form deserves a review and a better outcome for pensions should be found. The current arrangements should be replaced with a revised agreement in which the Government is only entitled to a share of surpluses if the Scheme falls into deficit, and the Government has to provide funds. In that event, the Government should be entitled to 50% of future surpluses up to the total value of the funds it has provided to make up any shortfall. Such an arrangement takes account of the vast funds the Government has received thus far and the significant reduction in the risk it faces, and would ensure that neither party will be out of pocket in future.

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Recommendation 14

Recommendation · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Recommended (the committee's words)
Whilst we have called for the 50:50 split to be replaced with a more appropriate arrangement moving forward, we believe pensioners should also receive a more immediate uplift. We recommend that the Government hands the £1.2bn it is due to receive from the Investment Reserve back to miners, and sets out its proposals for how and when this will be administered in response to this report.

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Conclusion 15

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
The Government’s guarantee has undoubtedly benefitted the Scheme’s members by providing vital security that the value of pensions will not decrease. However, the price of this guarantee is no longer fair.

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Conclusion 16

Conclusion · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Concluded (the committee's words)
The beneficiaries of the Mineworkers’ Pension Scheme toiled in dreadful conditions, to keep the country’s lights on. Many now live with industrial diseases caused by the dangerous nature of their former occupation. The least they should expect in return is the secure retirement they were promised decades ago. Yet, successive governments have failed to deliver this.

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Recommendation 17

Recommendation · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Recommended (the committee's words)
The Government must now accept its moral obligation to the Scheme members, and acknowledge that continuation of the surplus sharing arrangements in their current form robs beneficiaries of the financial security they have rightfully earned.

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Recommendation 18

Recommendation · Sixth Report - Mineworkers’ Pension Scheme · Addressed to Department for Business and Trade

Recommended (the committee's words)
Our recommendations set out equitable arrangements which would go some way to redressing the sense of historic injustice felt by the Scheme’s members. The Government must consider them carefully.

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Reports

1 report

Oral evidence sessions

2 sessions

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Date Session and witnesses Source
13 Apr 2021
Oral evidence session
Rt Hon Anne-Marie Trevelyan · Department for Business, Energy and Industrial Strategy, Rt Hon Kwasi Kwarteng · Department for Business, Energy and Industrial Strategy, Sarah Munby · Department for Business, Energy and Industrial Strategy 		View ↗
23 Mar 2021
Mineworkers' Pension Scheme
Allen Young · Mineworkers’ Pension Scheme, Chris Cheetham · Mineworkers’ Pension Scheme, Chris Kitchen · National Union of Mineworkers, Dan Whincup · Coal Pension Trustees Ltd 		View ↗

Who gave evidence

7 witnesses

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WitnessOrganisationSessions
Allen Young · Pensioner Elected Trustee Mineworkers’ Pension Scheme 1
Chris Cheetham · Chair of the Committee of Management, and Trustee Mineworkers’ Pension Scheme 1
Chris Kitchen · General Secretary National Union of Mineworkers 1
Dan Whincup · Head of Pension Strategy Coal Pension Trustees Ltd 1
Rt Hon Anne-Marie Trevelyan · Minister for Energy, Clean Growth and Climate Change Department for Business, Energy and Industrial Strategy 1
Rt Hon Kwasi Kwarteng · Secretary of State Department for Business, Energy and Industrial Strategy 1
Sarah Munby · Permanent Secretary Department for Business, Energy and Industrial Strategy 1

Correspondence

13 letters

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PublishedDirectionLetter
8 Jul 2021 To committee Letter from a member of the public relating to the British Coal Superannuation Scheme
26 May 2021 To committee Letter from the Minister to the Chair relating to the Committee’s report on the Mineworkers’ Pension Scheme
13 May 2021 To committee Letter from the Chief Secretary to the Treasury to the Chair relating to the Mineworkers’ Pension Scheme
29 Apr 2021 To committee Letter from the Chair to the Minister for Business, Energy and Clean Growth relating to the Mineworkers’ Pension Scheme
29 Apr 2021 To committee Letter from the Chair to the Chancellor of the Exchequer relating to the Mineworkers’ Pension Scheme
27 Apr 2021 To committee Letter from Jonathan Gullis MP on the Mineworkers’ Pension Scheme
27 Apr 2021 Not recorded Selected emails received by the Business, Energy and Industrial Strategy Committee as part of the inquiry into the Mineworkers' Pension Scheme
27 Apr 2021 To committee Letter from the Minister to the Chair on the Mineworkers’ Pension Scheme
15 Apr 2021 To committee Letter from Aaron Bell MP to the Chair regarding the Mineworkers’ Pension Scheme
15 Apr 2021 To committee Letter from The British Coal Staff Superannuation Scheme to the Chair regarding pensions to former staff of British Coal
15 Apr 2021 To committee Letter from Lee Anderson MP to the Chair regarding the Mineworkers’ Pension Scheme
13 Apr 2021 To committee Letter from the Trustees of the Mineworkers’ Pension Scheme in follow up to oral evidence given on 23 March
13 Apr 2021 To committee Letter from Grahame Morris MP to the Chair regarding the Mineworkers’ Pension Scheme