The National Union of Mineworkers (NUM) is demanding that Government rethink its findings and give mineworkers a fairer deal following the House of Commons Business, Energy and Industrial Strategy (BEIS) Committee Report.
Campaigning for a review of the Mineworkers’ Pension Scheme (MPS) since 1999, the NUM has always believed that former mineworkers should be entitled to a greater return than the ‘option of a guarantee with a 50:50 split’ of surplus funds imposed back in 1994.
Having commissioned two complementary independent reports, The MPS Guarantee, UPS Memorandum, 1 Feb 2018; and A Fair Division of Surplus in the Mineworkers’ Pension Scheme, First Actuarial, Jan 2018; the NUM provided evidence that, in both cases, conclude the unfairness of the current distribution of surplus funds.
The first report, the MPS Guarantee, found:
It is in Members’ interests to retain a Guarantee, but due simply to the passage of time, it would, in any event, be reasonable and fair to review the terms of the Guarantee.
There are, in addition, more specific issues, that now justify such a review, including:
- First, the lack of any meaningful assessment of the appropriate return for the Guarantee;
- Secondly, the existence of other forms of protection for members’ benefits, unlike the situation when the Guarantee was first established;
- Thirdly, the inappropriate use of ‘prudent’ assumptions in the valuation used to operate the Guarantee that are, in practice, an apportionment of assets, as opposed to determining contributions;
- Fourthly, the inconsistency between the timing of the Scheme’s liabilities and the provisions for making payments to the Government; and
- Fifthly, the relatively low level of benefits paid by the Scheme.
The second report, A Fair Division of Surplus in the Mineworkers’ Pension Scheme, found:
- The median gain made by the Government amounts to £23 billion in real terms over the next 60 years and, due to the potential for the Government to achieve very large gains, the gains made are skewed upwards to £55 billion, while;
- The probability of the Government incurring any sort of loss through the arrangements over the next 60 years is only about 3 per cent, and the probability of a loss greater than £10 billion, in real terms, is exceedingly low.
General Secretary of the National Union of Mineworkers, Chris Kitchen, comments: “The findings from both of our independent reports, along with BEIS, make it clear that the distribution of surplus funds – not including the Investment Reserve - should be reviewed on the grounds of ethics and fairness.
“The Government talks about levelling up but is content with taking funds from retired miners without ever having contributed a penny.”
The MPS Guarantee, UPS Memorandum states:
- The Government had a clear moral obligation on privatisation to protect the pension arrangement of current and past mineworkers who had worked for British Coal.
- It was in the Government’s own interest to take the pension obligations off the table when seeking to maximise value for money when completing the sale of the assets of British Coal.
- Simply given the time that has elapsed since the Guarantee was agreed, it seems responsible to ask that there should, in any event, be a review of how it operates.
Chris continues: “Within our first report it states: ‘We now know a lot more about the finances of the MPS and the risks that it faces than was known in 1994, when the agreement was made. However, given the size of the sums involved, it is not surprising that successive Governments have sought to avoid any such review’.
“While this may be the case, for the sake of our members and their families, we will continue to fight for a fair deal. It is only right.”
Since 1996 the Government has accrued £4.4 billion in payments from the MPS under the terms of the Guarantee that is in place, while members have received Bonus Augmentations of around 30 per cent of their guaranteed benefit.
The NUM was not involved in establishing the terms of the original agreement and has argued consistently for changes that would achieve a fairer outcome for retired mineworkers and their families.
The NUM will continue to lobby the Government and campaign for a more balanced approach to the distribution of surplus funds, with the recommendation that its entitlement to the Investment Reserve of £1.2bn is also redirected to pension members.