AEA Technology Pension Scheme

Motion made, and Question proposed, That this House do now adjourn.—(Lilian Greenwood.)

Let me start by setting out some context and background to how we got to the AEA Technology pension scheme scandal. I will set out the moral case for redress, sum up some of the independent evidence supporting the pension campaigners’ cause, and address some previous comments made on the issue by the Government and some amendments relating to it that are currently going through the House of Lords.

I hope that we can begin on a subject of agreement. I hope that we all recognise the vital importance of pensions as part of our financial and life planning system and the importance of having a pension system in which everybody can trust. I hope the Minister will agree that that is particularly important, given that a Money and Pensions Service survey in 2024 found that 29% of 18 to 25-year-olds in work have never contributed to a private or workplace pension.

The AEA Technology pension scandal is a profound injustice that has affected thousands of individuals and families across the country. In 1996, the commercial division of the UK Atomic Energy Authority was privatised to become AEA Technology. The Government gave Parliament a number of assurances about its employees’ pensions, which led to 90% of employees transferring their pensions over. The assurances included one from Lord Fraser of Carmyllie, who said in 1995 that

“employees of other parts of the authority which may be divested need not be concerned about their future pension arrangements. It is the authority’s clear policy, irrespective of employment law, that employees who move to the private sector should be able to join a pension scheme which is broadly comparable with the authority pension scheme. Indeed, to do otherwise might mean that employees had a claim for constructive dismissal.”—[Official Report, House of Lords, 30 October 1995; Vol. 566, c. 1289.]

However, the new scheme turned out to be less favourable. While the UKAEA scheme had a specific provision that the Government would pay the benefits if the scheme did not, it turned out that the new scheme had no equivalent provision.

At privatisation, the Government transferred less than half of the accrued pension contributions into the new AEAT pension scheme, underfunding it from its inception. In 2012, AEA Technology entered a pre-pack administration. The underfunded AEAT pension scheme was in deficit and was transferred into the Pension Protection Fund. The employees paid into the UKAEA scheme for pensions linked to the retail prices index, but the PPF provides no inflation protection at all for the pensions those employees earned before privatisation. They now receive about 50% of the pensions they were promised. This is particularly galling for AEAT closed section pensioners, who paid extra pension contributions—30% more than in the open section—specifically to purchase RPI indexation.

At the time, the Government actuary assured people in writing that they would receive the same pension benefits from the new scheme, and specifically advised them not to consider the security of their pensions in making their decisions. Alongside this, there is strong evidence, which I am sure the campaigners would be willing to share with the Minister, that the Government transferred less than half the proper sum into the new scheme at privatisation. They kept about £200 million. Campaigners believe that had the proper sum been transferred in 1996, it is unlikely that the scheme would have been underfunded and wound up in 2012. There is a strong moral case for redress. Ultimately, for hundreds of pensioners, in my constituency and across those of my colleagues, the retirements they saved for have been blighted.

I want to say a little about why this particular pension case is unique and unusual and contains factors related to actions of the state, because I am aware that many such cases come across the Minister’s desk. Both I and my colleagues, including my hon. Friends the Members for West Dorset (Edward Morello) and for St Neots and Mid Cambridgeshire (Ian Sollom), have heard from our constituents about the devastating effect this scandal has had on their retirements. I spoke with campaigners in my constituency just a few weeks ago, and they told me that their plans to provide for themselves and their dependants at the end of their lives were shattered. They have lost a huge fraction of their pensions, and they told me that they feel that recent Budget changes will make very little difference to them. They have spent years pushing on this issue, only to have been failed time and again by successive Governments. On top of that, it has been estimated that around 200 of the affected campaigners have died.

Many independent reports have supported the pension campaigners’ cause. In 2023, a National Audit Office report clearly demonstrated that the Government Actuary’s Department failed to inform closed section pensioners about the loss of Treasury backing when transferring their benefits from the UKAEA pension scheme to the AEAT scheme. Later in 2023, a Public Accounts Committee investigation found that pensioners had not only been misled, but lost money as a result. It also found that no Government Department had taken responsibility, and that pensioners had been passed “from pillar to post”, as well as having no route for appeal.

In 2023, the Work and Pensions Committee, chaired by the right hon. Member for East Ham (Sir Stephen Timms), concluded that the Government should report back on how they intended to ensure an adequate means of redress for the pension scheme members. The then Under-Secretary of State for pensions, Paul Maynard, accepted the Committee’s recommendations and began to communicate with the Cabinet Office on the matter, only for that to be abandoned with a change of Government. The current Government have not accepted the findings, and have stated, without particularly clear justification:

“There are no plans to offer specific redress to AEAT members.”

The Government have often claimed that the matter has been “thoroughly investigated” by previous Ministers. The pension campaigners and I feel that that is not the case.

Similarly, the response that I received to a letter from November requesting a meeting with the Minister to discuss this issue—I am grateful to him for making time to meet me—stated:

“there are no plans to put in place a further review…the Chancellor announced at the Budget that this government will introduce pre-1997 indexation into the PPF and FAS to address this matter, and that AEAT members will benefit from this measure”.

However, my constituents feel that those recent changes will make very little difference compared with what they have lost. Again, they have produced calculations to illustrate that; I am sure that they would be happy to share them, should the Minister be interested.

Perhaps more concerningly, the Department for Work and Pensions and its Ministers have repeatedly insinuated that the matter has been investigated by various ombudsmen. The truth is that no ombudsman has ever investigated the information on pension options given to scheme members by the Government and their agents in 1996.

The Pensions Ombudsman refused to investigate on the basis that the Government Actuary’s Department is excluded from its remit. The Financial Ombudsman Service cannot deal with defined-benefit pension schemes, so this did not fall within its remit either. The Pensions Ombudsman said that it could take action only if the PPF board had made a mistake, which it had not.

As the Minister will be aware, the Pension Schemes Bill is currently being debated in the House of Lords. The noble Baroness Ros Altmann, who we can all agree is widely recognised for her expertise on pension matters, recently made a strong statement supporting the AEAT case to the Lords Committee on the Pension Schemes Bill. She proposed a solution by which schemes such as AEAT’s could leave the PPF with full compensation. The Lords Minister, the noble Baroness Sherlock, rejected that proposal. The noble Lord Palmer of Childs Hill tabled amendment 218 to the Pension Schemes Bill, which would require the Secretary of State to commission an independent review into the pension losses incurred by former employees of AEA Technology.

Numerous insinuations have been made in the House of Lords, such as those made by the noble Baroness Sherlock, claiming that the 1996 Government Actuary’s Department note highlighted the risk that the scheme might fail. For the pension campaigners, that is simply not correct: the words “risk” and “fail” were not used at the time in the Government Actuary’s Department note in connection with the AEAT scheme.

In conclusion, I want to put forward three key problems to the Minister today. First, the pensioners received poor information from the Government on their pension choices at privatisation. The information that they were given was not accurate or complete, and that precluded them from making an informed choice about whether to accept the privatisation of the pension alongside their employer. Secondly, the Government retained a large proportion of the funds that should have been transferred to the new pension scheme. Thirdly, the PPF is making a large profit on the assets transferred in from the AEAT scheme, while members are receiving 50% of the benefits that they spent many decades paying for.

My affected constituents, alongside campaigners from across many constituencies, have five questions for the Minister. I hope that he will be able to answer this afternoon; if that is not possible in some cases, I hope he will be willing to make a commitment to write to me with his findings.

First, why has the current Pensions Minister refused to provide redress for AEAT pensioners without giving reasons why, even though a thorough investigation by the Public Accounts Committee concluded in their favour and the Pensions Minister at the time accepted that conclusion and indicated to the Work and Pensions Committee that he was keen to resolve the situation?

Secondly, how are the Government to be held to account for the wrongdoing that has ruined the retirement of elderly AEAT pensioners, many of whom, very sadly, have passed away without justice, given that the previous Administration accepted the objective, non-political findings of the Public Accounts Committee?

Thirdly, why do Government officials, particularly in the Department for Work and Pensions, repeatedly make insinuations to the effect that the AEAT pension situation has been thoroughly investigated by previous Ministers when the evidence does not support that assertion?

Fourthly, why is the Government’s position on AEAT pensions the exact opposite of that taken by the right hon. Member for East Ham when he was Chair of the Work and Pensions Committee?

Fifthly, will the Minister require or request that the Government Actuary’s Department publish its calculations —not just the assumptions underlying its calculations—of the sum transferred to the AEAT scheme at privatisation, on the basis that GAD presumably calculated what the cash equivalent transfer sum required by the Pension Schemes Act 1993 would have been?

I hope we can all agree that it is vital that people invest in their pensions during the course of their working lives, so that they can have confidence in their wellbeing and livelihoods when they reach retirement. That is particularly important because of the figures I cited at the beginning of my speech, which reveal a worrying lack of investment in private or workplace pensions. This is not just about redress for the AEAT pension campaign, although that is the most important thing; this is about showing that the Government believe in the integrity of pension schemes and are committed to making sure that everybody has faith in those pension schemes. It is so important for people to invest in them.

I congratulate the hon. Member for Didcot and Wantage (Olly Glover) on securing today’s debate, and endorse his opening remarks about the general importance of pensions. We should all think that, but Pensions Ministers should certainly endorse wholeheartedly what he said. He and I have discussed this issue on a number of occasions, and he has spoken clearly and passionately about it today, as always. We all absolutely understand why it has such resonance, particularly for his constituents.

I express my sympathy for all the AEAT pension scheme members. All of us would hate to see our employer enter administration and our pension scheme enter the Pension Protection Fund. I meet a wide range of individuals who have been through that exact experience, and many of them rightly bring the same kind of passion to their cases as he has done. That is particularly true of many of those with pre-1997 accrued pensions, as was the case for many members of this scheme.

The hon. Member is right to say that there was a particular focus on securing better indexation at the point of transfer, so I can understand why these pensioners feel that they have not secured what they had hoped for. It is also particularly true for those with accrued public sector pensions that transferred into private sector schemes at the point of privatisation. We are discussing one of them today, but it is far from the only one—Carillion is obviously the highest-profile case in the recent past. That can no longer happen, given the changes that have been put in place. At the point of privatisation, we will no longer see accrued pension rights transferred into private sector schemes. This is a real issue, but that exact situation cannot occur in future.

As we have heard, this matter has a long and complex history. The company was privatised 30 years ago, in 1996. On the hon. Member’s questions about the value at transfer, the reassurance I can offer—I know it will not be enough for his constituents and others who have raised the case with him—is that the transfer value was agreed by the trustees. It was not proposed by the firm or the Government at the point of transfer, and the financial assumptions that underpinned it were common at the time.

I understand what the Minister is saying about pre-1997 indexation, but that is not the primary issue. The calculations by the campaigners about the difference this makes to their losses is that it is trivial—very small. I do not have the exact percentage, but it is probably a 5% difference, or something along those lines. I am very happy to share that with the Minister. That does not address the key issue, which is that Government guidance was incorrect at the time, and that led people to make decisions on the basis of wrong information. I suggest to the Minister that pre-1997 indexation is a different issue.

I recognise the point the hon. Member is making, which is that the nature of insolvency and entering into the PPF will have made more of a difference than future PPF accruals. However, had a previous Government—for example, the one that included the Liberal Democrats—introduced pre-1997 indexation a decade back, it would have made significantly more than a 5% difference. That would have made a very large difference to the pensions that AEAT members are living on today.

I am responsible for what the Government are doing about indexation now, and it is a lot more than 5%, because even in just the last years inflation has been running at particularly high levels. I do not agree with the hon. Member’s calculation, but I do agree with him that that is definitely not the entire story. I totally understand that members’ feeling about the advice they received back in the 1990s is at the core of their view that they should never have been in a situation where their pensions were transferred out of the public sector in the first place, and he is right to say that that issue is different from the indexation that occurs within the PPF.

I am merely pointing out that the reviews the hon. Member has mentioned, including that of the Public Accounts Committee, focused on the issue of indexation. My best bet is that, if the Government were not acting on this issue, it would have been one of the issues he raised with us here today, but he is completely right to say that it is not everything. I have said what we are doing to address the lack of indexation: we are acting where previous Governments failed to do so, and acting because we can all put ourselves in the shoes of pensioners who have not seen their pension incomes live up to what they were expecting, through no fault of their own.

Let me close by again congratulating the hon. Member on securing this debate and for giving us the opportunity to speak on such an important subject. I appreciate that I cannot and have not offered everything that he and, indeed, AEAT scheme members would want, but this Government are making real, concrete changes to better protect the pensions of those members from inflation in the years to come. That cannot right all of their feelings about what has happened in the past, but as I say, this Government are choosing to act rather than promising another review in the months and years ahead.