Sixth Report - Mineworkers’ Pension Scheme

The government's response

What the committee recommended 18

1. 1
   The Scheme’s Trustees had little choice but to accept the Government’s proposal to divide future... Conclusion · paragraph 16
2. 2
   The Government failed to conduct due diligence during the 1994 negotiations and undertook no empirical... Conclusion · paragraph 17
3. 3
   The 50:50 split was, and remains, arbitrary. Conclusion · paragraph 18
4. 4
   To date, the Government has received £4.4bn from the Mineworkers’ Pension Scheme. Conclusion · paragraph 22
5. 5
   The Government has not paid any funds into the Scheme since the surplus sharing arrangement... Conclusion · paragraph 23

See all 18 recommendations and conclusions

Sources

• Sixth Report - Mineworkers’ Pension Scheme ↗The committee's report, HC 1346, parliament.uk
• Fourth Special Report - Mineworkers’ Pension Scheme: Government Response to the Committee’s Sixth Report of Session 2019–21 ↗The government's response, 5 July 2021, parliament.uk

Recommendations and conclusions 18

1. 1
   The Scheme’s Trustees had little choice but to accept the Government’s proposal to divide future... Conclusion · paragraph 16 · addressed to Department for Business and Trade Conclusion (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.
2. 2
   The Government failed to conduct due diligence during the 1994 negotiations and undertook no empirical... Conclusion · paragraph 17 · addressed to Department for Business and Trade Conclusion (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.
3. 3
   The 50:50 split was, and remains, arbitrary. Conclusion · paragraph 18 · addressed to Department for Business and Trade Conclusion (the committee's words)

   The 50:50 split was, and remains, arbitrary.
4. 4
   To date, the Government has received £4.4bn from the Mineworkers’ Pension Scheme. Conclusion · paragraph 22 · addressed to Department for Business and Trade Conclusion (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.
5. 5
   The Government has not paid any funds into the Scheme since the surplus sharing arrangement... Conclusion · paragraph 23 · addressed to Department for Business and Trade Conclusion (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.
6. 6
   Many former mineworkers have chronic health issues directly related to their former occupation, and the... Conclusion · paragraph 31 · addressed to Department for Business and Trade Conclusion (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.
7. 7
   We recognise that the Government’s guarantee is important, has contributed to the success of the... Conclusion · paragraph 46 · addressed to Department for Business and Trade Conclusion (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.
8. 8
   Given that the Scheme has continued to produce strong returns despite the 2008 Financial Crisis... Conclusion · paragraph 47 · addressed to Department for Business and Trade Conclusion (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.
9. 9
   Whether or not the Government knew in 1994 that it would disproportionately benefit from the... Conclusion · paragraph 48 · addressed to Department for Business and Trade Conclusion (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.
10. 10
    Governments should not be in the business of profiting from mineworkers’ pensions. Conclusion · paragraph 49 · addressed to Department for Business and Trade Conclusion (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.
11. 11
    The Government is disingenuous in claiming the Trustees are content with the terms of the... Recommendation · paragraph 53 · addressed to Department for Business and Trade Recommendation (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.
12. 12
    We are disappointed by the Government’s dismissive approach to proposals to review the existing arrangement. Recommendation · paragraph 54 · addressed to Department for Business and Trade Recommendation (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.
13. 13
    With the benefit of hindsight, it is clear that the Government has already profited greatly... Recommendation · paragraph 58 · addressed to Department for Business and Trade Recommendation (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.
14. 14
    Whilst we have called for the 50:50 split to be replaced with a more appropriate... Recommendation · paragraph 63 · addressed to Department for Business and Trade Recommendation (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.
15. 15
    The Government’s guarantee has undoubtedly benefitted the Scheme’s members by providing vital security that the... Conclusion · paragraph 64 · addressed to Department for Business and Trade Conclusion (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.
16. 16
    The beneficiaries of the Mineworkers’ Pension Scheme toiled in dreadful conditions, to keep the country’s... Conclusion · paragraph 65 · addressed to Department for Business and Trade Conclusion (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.
17. 17
    The Government must now accept its moral obligation to the Scheme members, and acknowledge that... Recommendation · paragraph 66 · addressed to Department for Business and Trade Recommendation (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.
18. 18
    Our recommendations set out equitable arrangements which would go some way to redressing the sense... Recommendation · paragraph 67 · addressed to Department for Business and Trade Recommendation (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.