Government committee inquiry issues damning verdict on how AEAT pensioners were treated

The government did not give members of the UK Atomic Energy Authority pension scheme enough time or support to make complicated financial decisions when the company was privatised, finds a report from the public accounts committee (PAC) which has been published today. The vast majority (90%) of existing members joined the new, private company pension scheme without being given a sufficiently clear understanding of the differences between the new scheme and their existing arrangement.

In the report, the PAC was critical of the way this was handled and made recommendations for the lessons the government should learn from this case.

Dame Meg Hillier MP, chair of the PAC, said: “In successive inquiries the PAC and other select committees have found a lack of oversight, joined-up thinking and strategy regarding pensions and pensions regulation. The government needs to take a long hard look at the lessons of this case and how it frames advice to people affected.” 

Background on the situation

The commercial arm of the AEAT was privatised in 1996. At the time, around 4,000 civil servants moved across to the new company, and nearly all (90%) transferred into its new pension scheme, the Atomic Energy Agency Technology Pension Scheme (AEAT).

The government assured scheme members that the new pension scheme would have equivalent benefits to the public sector scheme it replaced.

However, the information it provided – including a note from the Government Actuary’s Department which was supposed to highlight the key factors to consider – did not explain that the new pension scheme was not guaranteed by the government in the same way that the public sector scheme had been.

This became a serious issue when the AEAT went into administration in 2012 and its pension scheme entered the Pension Protection Fund (PPF). Some members lost significant amounts as a result.

The report’s recommendations in full

1. Reconsider the PPF’s inflation rules

Since the AEAT went into administration in 2012 and the scheme joined the PPF, scheme members have lost money in real terms, particularly in a time of high inflation. PPF compensation for benefits accrued before April 1997 – including all the benefits transferred in 1996 – are not increased for inflation at all. For benefits accrued from 1997 onwards, increases are capped at 2.5% per year.

2. There must be greater accountability and joined-up thinking in government

The report concludes: “AEAT pension scheme members have been passed from one part of government to another, with no department taking overall responsibility for their complaints … Responsibilities for pensions are spread across government, with different departments responsible for private and public sector pensions. The lack of joined-up thinking on pensions allowed the issue to fall between the cracks.”

3. There are currently gaps in the routes people can take to complain about their pensions

Neither the Pensions Ombudsman nor the Parliamentary and Health Service Ombudsman were able to look into this case. The former could not investigate because the case was more than 15 years old, and the latter because the complaints fell outside its statutory jurisdictions.

“Pensions are long-term financial products, and problems can take many years to become apparent,” the report concludes.

4. People were not given enough time or help to make complex financial decisions

AEAT scheme members were given a month to decide between their pension transfer options, and insufficient information, the report concludes.

This is not an isolated example. The public accounts committee investigated the British Steel Pension Scheme case and concluded that many scheme members suffered financial harm after they received unsuitable advice on their transfer options.

The report says: “We concluded that the regulatory system had left members open to being taken advantage of and that, seven years after the Pension Schemes Act 2015, regulated financial advisers were still not clear on what was expected of them.”

The Department for Work and Pensions is developing several projects to help people engage with and understand their pensions, the report concludes. However, the committee challenges: “it is not clear when these initiatives might come to fruition and lead to tangible improvements.”