Public Accounts Committee to probe AEAT scheme members’ treatment

The discovery is part of an ongoing National Audit Office investigation into the “AEAT pension scheme restructure in 1996, pension scheme members’ subsequent complaints that they were badly advised by the government actuary, and the difficulties they have had in getting their complaints heard”, according to a statement on the committee’s website.

Government actuary Martin Clarke and Amanda Campbell, chief executive of the Parliamentary and Health Service Ombudsman, will be called to give evidence.

A long time coming

David Johnston, Conservative MP for Wantage and Didcot, announced the breakthrough on his website at the end of January.

“Finally, these pensioners are going to get their day in court as it were and look at exactly what has happened, what went wrong, why it shouldn’t have happened, and what we’re going to do about it,” he said.

The National Audit Office, which has overseen investigations into British Steel and Equitable Life, is to publish its findings on the AEAT pension scheme on March 3. 

This origins of the dispute date back to 1996 when the commercial arm of the UK Atomic Energy Authority was privatised, leading to the creation of a company called AEA Technology.

The 3,000 employees were no longer able to access the public sector scheme, and so were given the option to transfer to a new defined benefit scheme, the AEA Technology Pension Scheme.

Benefits in this new scheme would be identical – or very close – to those they were already receiving. 

Assurances from the government, including comments from the minister in parliament, were persuasive and 90 per cent of workers opted for a transfer to the new scheme. 

However, in 2012 the company was failing and entered a pre-pack administration, with the pension scheme being shunted into PPF assessment, finally being transferred in 2016. 

PPF rules impose a 90 per cent limit on pension benefits for members who have yet to retire, which is also subject to an annual cap. 

As a result, many members have seen their pensions reduced on average by around 35 per cent, according to Johnston when he launched a private member’s bill in July 2021 to force the government to review the AEAT members’ situation.

“The Government Actuary’s Department produced its guidance having conducted no risk assessment of the new pension scheme that was being created,” he said at the time.

“This was a completely unproven company, and in the light of what happened, the pensioners would have been better with a more cautious note telling them about the possible risks.”

A long and winding road

Johnston is not the first MP to take up the AEAT’s cause. Conservative MP Geoffrey Clifton-Brown said during a parliamentary debate in 2015 that insufficient funds had been transferred into the scheme when it was started and that “no written agreements appear to have been made to cover such an eventuality”.

Former Work and Pension Committee chair Frank Field raised the matter during his tenure. He wrote to minister for pensions and financial inclusion Guy Opperman in 2018, asking for an investigation. 

Field said that the GAD had provided written information to AEAT employees at the time of privatisation that “helped reassure many of them that it was safe to move across’’ the pension schemes “on the grounds that the latter scheme was no less favourable’’. 

Former MP Ed Vaizey introduced a bill in June 2019 that would give the Pensions Ombudsman authority to begin an investigation. 

The bill, entered under a 10-minute rule, failed to pass through parliament. 

Vaizey said in 2019: “It is clear that my constituents and their fellow pensioners were misled 20 years ago in the advice on whether to retain their accrued benefits, in what was effectively a government pension scheme, or to transfer them to a private scheme.’’

A difficult future 

While the average reaction in benefits may be in the region of 35 per cent, some members may see significantly less in their benefits, according to a statement on the AEAT Pension Campaign’s website.

If reduced to PPF levels, scheme benefits for those who have not reached retirement will be reduced to 90 per cent. The index linking is also capped at 2.5 per cent on pensions accrued after 1997. 

However, there is no indexation on pensionable service prior to 1997 and inflation protection is a key feature for any pension, particularly this inflationary period.

Those who retired from AEAT in 2012 with 40 years’ pensionable service will receive a maximum indexation of 2.5 per cent for the years 1997 to 2012 and nothing on the previous 25 years. 

“The net result is that for some members, the agreement of the pre-pack insolvency event will result in probably a half to two-thirds of their pensions eventually being lost,” campaign’s website states. 

“The fact that many of them are either retired, or approaching retirement age, means they have no chance to recover the situation and they will be condemned to an old age of hardship. This is despite saving responsibly throughout their lives – behaviour the government is trying to promote.”

The Public Accounts Committee’s call for evidence closes on March 5.