A Letter to all Pension Plan Members

From Sandra Gidley, Liberal Democrat MP for Romsey,

Dear Pension Plan Members,

I am writing to let you know that I am keeping myself informed about your situation, and following the activity. I have concerns about the social policy issues of pensions in general, and the C-plan affair in particular. Since there is a complaint being looked into by the Ombudsman, and others heading that way, it is not appropriate for me to comment on the particulars of those cases, but I am offering to help if you have difficulties making use of the complaints procedures.

Final salary pension schemes are a good feature of life in the UK. Compared with other countries, we have a lot of people enjoying the security that they usually provide. Although our regulations only provide guarantees of pensions retaining their value for pension earned since 1997, the majority of companies have adopted the good practice of maintaining the value of pensions for all service.

Money purchase schemes have an advantage for the employer in the predictability of their cost, and an advantage for the employee in the ease with which they can be transferred to a new employer. However, they will need to have been in play for many more years before we can confidently assess them in relation to final salary schemes.

What is sure is that members of final salary schemes will feel aggrieved if they think, as many contributors to your website think, that their prospects are at risk because they are unfairly subsidising some money purchase scheme which has better benefits. I don't think this will be a common situation because the normal balance of employer and trade union influences, coupled with a sense of British "fair play" operated by the trustees, will avoid such situations. With its combination of trade union, pension, and trustee appointment policies, IBM is an unusual case.

The Ombudsman has to make his decisions on the basis of current law. I know some of you feel the law needs strengthening, both to help the Ombudsman defend members' rights and to add particular new regulations. In my view, the South African Government's approach of dividing the reserves of a scheme into a part for the employer and a part for the members is sound in principle but would be unnecessarily heavy regulation for our country.

Some minor regulatory change is another matter. If it should emerge that there is a risk that companies will follow one another in a downward policy of reducing the benefits in final salary schemes, so as to avoid spending anything on their money purchase schemes, then I would want the government to consider placing a limit, for example Limited Price Indexation, below which the benefits should not be allowed to fall.

I shall continue to watch the situation closely on your behalf, and act where I see the need.

Sandra Gidley

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