How Rachel Reeves prioritised growth over Britain's pension savers
When Labour swept to power last year, around half a million pensioners held their breath.
Members of the Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS) had spent years fighting for their full pension entitlement. Months earlier, the Tories had indicated they might finally be restored.
The PPF and the FAS step in to pay people's pensions when their defined benefit schemes can no longer afford to, often because a firm has gone bust and cannot afford to keep it running. The increasing costs of such schemes, partly due to increased life expectancy, have also put them under pressure.
Over the past 20 years, more than 2,000 schemes have been bailed out. However, the payments members receive are rarely the same as the entitlements they had built up – for some, it isn't even close.
Strict rules mean that when a scheme goes bust, anyone who is not already drawing their pension will only be entitled to 90pc of it when they retire. Crucially, payments for any years built up before 1997 also won't rise with inflation, while any after that are capped at just 2.5pc.
As a result, some members' pensions never increase, while others fall as low as 50pc of what they should have been.
Savers were hoping a Tory intervention would rescue them from retirement poverty while others could have seen six-figure losses reversed as they finally received the full pensions they'd worked decades for.
In July 2024, the power to change lives fell into the hands of the Labour party, bringing fresh hope that a battle stretching across two decades could finally be won.
Yet 12 months on, Chancellor Rachel Reeves continues to ignore their plight, instead choosing to hand a major financial boost to pension providers in her relentless pursuit of growth. A fortnight ago, she announced plans to tweak rules that would mean they no longer have to pay a multi-million pound levy to sustain the scheme, which has raised £10bn over two decades.
Those whose pensions rely on the PPF and FAS called the decision 'shameful', 'morally corrupt' and 'pandering to the industry' as they continue fighting for their full payments.
After years of lobbying, campaign groups are animatedly pointing to the £13.7bn in reserves that the PPF now holds. It would cost just £10.1bn to restore the pensions of its 293,000 members, including awarding inflationary increases of up to 5pc and repaying arrears.
However, the fund is powerless without a change in legislation.
After the election, with hopes growing that Labour would make that change, eyes were keenly trained on the Pension Schemes Bill. When it was published earlier this month, it did contain a major legislative change – but for pension schemes, not members.
The Bill gives the PPF greater powers, but only to reduce the levy that pension schemes pay to sustain it. First collected in 2006-07, it has already fallen significantly since its record level of £720m in 2010-11. It now sits at just £45m, and the PPF will soon be able to reduce it to zero. The levy can be reintroduced again if needed.
The move will give schemes extra cash at a time when they are being pushed into increasing their UK investment by the Chancellor's recent Mansion House reforms.
Saving wealthy pension schemes money when individuals are struggling doesn't sit well with Maurice Alphandary, 70, from Abingdon, near Oxfordshire. He worked as a chemical engineer for AEA Technology, the commercial arm of the UK Atomic Energy Authority, which was privatised before going bust.
He now runs the AEA Technology Pensions Campaign, which has spent 13 years fighting to restore pensions. The current PPF rules will cost him around £100,000.
He said: 'It just shows how toothless the PPF is in protecting the interests of its members against the Government. The Government can just ride roughshod over them.
'On the one hand, the Government says, 'We really care about our pensioners', but they don't. They're just pandering to the industry and it's a way of just running down the surplus instead of giving to the people who have suffered. There's enough money to compensate us.'
His former colleague, 73-year-old Andrew Turner from Abingdon, receives just £18,000 per year from a pension that should pay £29,000.
He said: 'For a Labour government who are supposedly focused on those who are less well off, this seems to be exactly the opposite of what they should be doing.
'The question is why should pension companies be rewarded when we're being penalised. If the Government or the PPF had any moral responsibility, it's those who are in greatest need should have first call on this surplus.'
The Bill contained no news for the 140,000 FAS members either. With no levy, any changes would be funded by the public purse.
David Page, 73, lives in Chelmsford and worked for Bradstock Group, a commercial insurer that went bust in 2003. He only receives around half of the pension he paid for, and is not confident of any progress.
He said: 'It still hurts. It's typical of governments. They don't want to spend money. This one will be the world's worst. It's morally corrupt, but morals don't count do they?'
Terry Monk, 81, from Camberley in Surrey, also worked for Bradstock. He said the Government's decision to pursue growth with members' money was 'shameful'.
He said: 'What they're forgetting, or choosing to ignore, is how that surplus has arisen in the first place and it was a combination of schemes' assets and members' contributions.
'They're trying to get money that they don't own to fund projects. I'm suspicious of the people we have in power at the moment.'
For its part, the Government is expected to address retirement poverty in part two of its pensions review. It has already given £1.5bn back to retired miners and is considering handing over £2.3bn more.
Ministers have also met with PPF and FAS members to hear their concerns, and accepted it was an 'important issue'.
A Department for Work and Pensions (DWP) spokesman said: 'The Government is continuing to consider what we have heard from the PPF and FAS members on this issue.'
A PPF spokesman said it welcomed the fresh consideration that the DWP was giving to compensation levels.
They added: 'Given our financial strength, we think it's the right time to reduce costs for levy paying schemes and their employers and to consider the levels of indexation we pay our members.'
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