The Pension Schemes Bill is nearly an Act of Parliament, but despite its overarching aim of improving member outcomes, one substantial group of pensioners have been overlooked, writes Nick Reeve.
One of the mantras of policymakers throughout the Pension Schemes Bill’s passage through parliament has been its ultimate goal of improving member outcomes.
Many of its measures are more than likely to aid in this aim, which is why it is important that the mandation issue gets solved. MPs and peers will attempt to break the deadlock on this on Monday.
But amid the headline-grabbing quotes from this week’s debates, it was easy to miss one element that was, unfortunately, swept aside through parliamentary protocol.
For years – decades, even – members of the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) who accrued the majority of their benefits before April 1997 have been fighting for some kind of inflation protection. All the while, their payments have been eroding in real terms, they have been getting poorer, and they are dying.
In November, at long last, the chancellor Rachel Reeves announced that the PPF’s rules would be changed and it could use some of its vast reserve to pay capped inflation-linked increases to these people. The first payments will land next January.
For the government, it appears, this is job done. They can say to backbench MPs that they’ve taken action to help older constituents in a way that’s affordable for the public purse.
But, as campaigners continue to point out, this forward-looking amendment only scratches the surface. For many affected pensioners, their benefits have been eroded by 30 years of inflation, and some form of backdating could make a huge difference. The Pension Schemes Bill presented a chance to do this, and policymakers in both houses of parliament tried to make the case for further compensation for those affected.
However, over the past few years, the PPF’s reserve has been reported on the government’s balance sheet – even though this money can only be used to compensate people in the PPF’s care. This quirk of accounting means any proposed changes to PPF legislation can be quashed using the House of Commons’ “financial privilege” power. This allows MPs to overrule any Lords amendments that have cost implications.
This power exists for good reason. Our elected representatives should be the ones with the purse strings. In this situation, though, the use of this power feels like a convenient get-out clause. The government, effectively, has said it won’t allow PPF reserves to be used to compensate PPF and FAS members because that £14bn makes the balance sheet look better.
I can’t help but feel that those who have campaigned for so long for more adequate pensions deserve better than this.
Nick Reeve is editor of Pensions Expert.
