If you write to your MP about pensions, it is likely that they will pass your letter on to some Government department for comment, because most MPs would not feel qualified to respond in detail but they do want to illustrate that they are doing something on your behalf.  This page contains a response obtained from the Department of Work and Pensions (DWP) in that way.  (Blogg is a pseudonym).

The top man in the DWP is Andrew Smith who, not surprisingly, is responsible for "work and pensions".  The top man for just "pensions" is Malcolm Wicks and the letter was sent over his signature.

Interspersed comment in green is not part of the letter but is AMIPP's effort to read the meaning behind the words. AMIPPs other comments on the proposed regulations may also be helpful.

The letter:

I appreciate Mr Blogg's concern and that of the other members about the IBM pension fund. However, although I hope that they will understand that it is inappropriate to comment on individual schemes, I want to assure them that the Government fully understands, and shares, the concerns about occupational pensions.

In general, there is nothing to stop the DWP commenting on individual schemes but in the case of IBM UK they would not want to tread on the Ombudsman's toes.

As they are aware, the need was highlighted in the pensions Green Paper, 'Simplicity, security and choice: Working and saving for retirement', to review the protection offered to occupational pension scheme members as part of a reformed regulatory regime. Therefore when we published the response to the Green paper consultation process, 'Working and saving for retirement, Action on occupational pensions', it contained a substantial package of measures which addresses the concerns that are causing people anxiety about pensions today. 

The DWP knows AMIPP is aware of the Green Paper because we responded to the consultation on it and because of the content of letters from people registered with AMIPP.

We are determined to act to strengthen protection for scheme members. On 11 June, the Secretary of State announced measures that are designed to prevent these situations arising again in the future. He said: "We want to make it easier for people to save and easier for companies to run good pensions schemes. I've taken a hard look at all the proposals made following the Green Paper and struck a balance between reducing costs on schemes while also providing new protection for people who work hard to build up pension rights."

The June 11 date is significant because not only were measures announced but some were in immediate effect, thus closing loopholes.  The "reducing costs" was achieved mainly by reducing the mandatory protection against inflation for pension earned in the future - from RPI-up-to-5% to RPI-up-to-2.5%. 

Our plan introduces a package of proposals including improving member protection by introducing a new Pension Protection Fund. The first ever of its kind in the UK to guarantee members a specified minimum level of pension, when, the sponsoring employer becomes insolvent. Additionally, a full buy-out requirement will be introduced to ensure that where a scheme is wound up and its sponsoring employer is solvent, the pensions promises made by that employer are more likely to be met.

If you believe IBM UK will remain solvent, the "full buy-out" is more important to us than the Pension Protection Fund (PPF).  The effect of it is to make wind-up much more expensive than continuing to run the scheme, so there is little chance of the C-Plan being wound up.  The PPF is more of a burden to us, since our scheme will be paying into a fund that there is little prospect of us drawing on - that is sometimes the nature of insurance. 

(Another non-obvious point of detail - although the description is "full buy-out" there is some loss for members, since the buy-out does not provide any future increases in pension.)

It is nice to see the phrase "pensions promises" used by the DWP.  One component of the complaints now with the Ombudsman is about how those promises were established and whether they are being fulfilled.

Once the Pension Protection Fund and full buy-out are in place, individuals in pension schemes will be able to have much more confidence that they will receive all or most of the pension they were expecting. However, in advance of the compensation scheme coming into effect, there may still be some people who are at risk of losing out significantly. And in rare cases, employers may not be able to meet the full buy-out requirement if they would be at risk of becoming insolvent by doing so. Therefore, we are going to publish draft regulations, which will ensure that where there are insufficient assets to meet all liabilities they are shared out as fully as possible between active and pensioner scheme members. We will be consulting on these draft regulations over this summer, and expect them to come into force this autumn.

That schedule was optimistic - the consultation started on 22nd October.  "shared out as fully as possible" is spin/mistype for "shared out as fairly as possible" since the "insufficient assets" remain the same and it is the pain that is shared out differently.  Not a problem for us if we expect IBM UK to remain well solvent.  The problem for the Government, not mentioned in this letter, is that some tens of thousands of people were caught by the thoroughly bad regulations that pertained before the new ones, and the Government is planning to just let those people suffer. (See pensionstheft)

I note Mr Blogg's comments that the Pensions Ombudsman's mechanism needs strengthening. The intention of the Pensions Ombudsman is to provide a less cumbersome and legalistic alternative to resolving disputes than through the Courts. The ability of the Pensions Ombudsman to investigate complaints of maladministration gives members the opportunity of a remedy which might not have been available through the Courts in any event and his wide investigative powers also enable him to determine complaints of maladministration and direct redress in ways in which the Courts might not be able to do so.

It is a characteristic of letters from the DWP that they are padded out with things you know and the DWP knows you know.  What is omitted has significance.  Here the DWP does not acknowledge that the Ombudsman has said he is falling behind because of the pace of new complaints.  It ignores the mounting evidence that the Ombudsman has difficulty making decisions that are ethically "right" and in accordance with what Parliament intended because the pragmatic solution to his resource problems is to find against complainants and avoid the expense and risk of appeals to higher courts. 

When the relevant legislation was introduced, it did not define the term "maladministration". This was in line with legislation relating to other Ombudsmen where the term was also not defined. The only route of appeal against the Pensions Ombudsman's decisions is to the High Court on a point of law, and it is, to a certain extent, inevitable that higher Courts in considering appeals against his determinations may take their own view as to the extent of his remit and the extent of his powers of redress. The Pensions Ombudsman can, and does, alert my Department if the outcome of a particular appeal gives him cause for concern.

The Ombudsman argues that there would have been no need to introduce the term "maladministration" if Parliament had not intended it to cover more than what were already offences at the time.  The "certain extent" bit is weasely - it is the vagueness of the regulations that allows judges to indulge their contempt for the Ombudsman.  (They resent somebody who is not a judge having judicial powers.) 

Mr Blogg also mentioned member trustees. We will be taking an important step in removing the right of the employer to propose alternative arrangements, as this currently allows employers to avoid member trustees altogether. We will also be looking to take steps to raise that standard of trusteeship generally. We believe that the quality of trustees and the decisions they make is more important than who they are or how they come to the post.  

This is where the DWP is on the weakest ground and makes the most dubious of remarks.  There is nothing intrinsically wrong with "alternative arrangements" - the IBM UK arrangements are technically in this category but are reasonably "fair and open".  Allowing the company to choose some people and label them as member trustees, rather than having a "fair and open" selection, may actually be worse for the members than having no member trustees.  The Government's intention is to have guidelines for what is "fair and open" selection of member trustees and then allow rogue trusts to ignore those guidelines with impunity.  This is how the Occupational Pensioners Alliance describes it:

"Member Representatives or Cronies?".   Currently a trust board of, say, twelve trustees might contain the Finance Director of the company, the Human Resources director, and a couple of their staff, all appointed by the employer.  No harm in that, if those people can handle the conflicts of interest.  But would these be the people the members would choose to represent their point of view?  Under proposed new regulations, the company could just deem these four to be the Member Representatives.  Member complaints that this did not meet the "fair and open" guidelines for member selection of trustees would be irrelevant.  The only test is a crude count of heads that are both trustees and members.   If your company scheme currently has trustees chosen by the members, you might want to see if they are aware of this prospect. More detail is on www.copas.org.uk .

The sentence "We believe that the quality of trustees and the decisions they make is more important than who they are or how they come to the post." is an example of a false alternative.  The sentence suggests that in order to improve the quality of trustees and decisions one must sacrifice something in the area of fair and open selection.  But the opposite is true; mandatory fair and open selection will lead to better trustees.

We believe that provided a minimum of one third of the trustees are member-nominated trustees, then the detail of how they are nominated and selected is something best left to the existing trustees to decide.

Note that "fair and open" is a detail as far as the DWP is concerned.

There is room for genuine differences of opinion about whether Member Trustees are a good thing.  The argument against can be summarised as "Would you want to fly in a plane if the pilot was chosen from amongst the passengers?".  The argument for can be summarised as "Would you want the governing political party to choose all of the MPs?".  This Government apparently does not really believe in the merits of Member Trustees in the way that other political parties do, which is why they are happy to see Member Trustees chosen by the existing trustees rather than chosen in a fair and open way by the members.  It does not plan to give scheme members any right to object.

However, these are only plans and could well be amended by Parliament.

The Conservatives do attach importance to Member Trustees, or at least once did.  William Hague told the Commons in 1995: "As a result of the [Conservative] Government's proposal millions of pensioners will be consulted about the arrangements for selecting member nominated trustees - arrangements that will be subject to pensioners' right to object to them and vote on them if enough people object.  We are doing a great deal to ensure the involvement of pensioners".  When introducing the resulting regulations Peter Lilley said the purpose of Member Trustees was "to give members more influence in the running of their schemes".

Steve Webb MP has said that requiring fair and open selection is in line with Liberal Democrat principles.

I hope this information clarifies the position and is helpful in your response to Mr Blogg.

It clarifies in some places and obscures in others.  

MALCOLM WICKS MP

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