Newsletter sent 11:26PM 11/12/2013
Newsletter for AEAT Pension Scheme members. No 1: December 2013
It is just over a year since AEA Technology plc was wound up in a pre-pack administration. You are no doubt aware this has had a catastrophic effect on the AEAT Pension Scheme, with its impending transfer to the Pension Protection Fund (PPF). This is terrible news as not only will there be a 10% overall reduction in pension for those yet to retire, there will be a loss of index-linking, with a drastic cut in annual inflation allowance. The impact of removing index-linking should not be underestimated, as it will result in a serious reduction in the real value of the pension with time.
How much do we stand to lose?
The AEAT Pension Scheme entered the Assessment Stage for transfer to the PPF on 8th November 2012, the date AEA Technology plc entered the pre-pack administration. As of that date, member benefits are determined and paid according to the PPF rules, which effectively supersede the rules of the Scheme.
The important differences between the Scheme rules and those of the PPF concern inflation linkage and the imposition of caps. Under the PPF, for those below the Normal Retirement Age (NRA) – 60 for many of us – pensions will be initially paid at 90% of their original value. Those of us aged above the NRA on the 8th November 2012 will receive 100% in the first instance. There is also a cap on the total amount of benefit payable that is dependent on age, although this only affects a very small minority those who retired on a high salary and has been relaxed slightly for those with long service. Full details of how entry into the PPF will affect you can be found on the PPF website: www.pensionprotectionfund.org.
Inflation linkage is the area where most of us will be hardest hit, particularly those who opted for the closed section of the AEAT Scheme at privatisation. Under the PPF rules, for pensions in payment:
- Benefits arising from contributions made after 5th April 1997 will receive inflation linkage to the CPI up to a cap of 2.5%.
- Benefits arising from contributions made before 5th April 1997 will receive zero inflation linkage. This includes all service transferred at the time of privatisation.
These provisions are insidious because the impression given in the early stages of transfer to the PPF is that everything is very much the same as it was before. However, this is a ticking time bomb that will drastically reduce the real value of our pensions in years to come, as the effects of even quite moderate rates of inflation become apparent. For those who are not yet drawing their pensions, benefits will continue to be adjusted with inflation up to a cap of 5% for accruals prior to 6th April 2009, and a cap of 2.5% for those after this date. Once the pension starts to be drawn, the above rules apply.
We recommend that you review your own position with a spreadsheet, if you haven’t already done so. There is one on our website that you can use. But as a simple but not atypical example, someone with 30 years contributions, 10 of which were post-1997, will receive a maximum 10/30 x 2.5% = 0.8% annual increase if the rate of inflation is at or above 2.5%. If inflation runs below this figure, an increase of only 1/3 of the inflation rate will be awarded. For a 20-year retirement starting with a pension income of £10,000 pa at a constant inflation rate of 3%, this corresponds to a total loss of £52,800 compared to the entitlements under the AEA Scheme. This sum increases to £74,400 if the NRA is after 8th November 2013. For a 5% inflation rate the loss is respectively £114,000 and £135,000
So who are we and what are we doing?
A number of aggrieved AEAT Scheme members have got together and formed the AEAT Action Group, to further the cause of all Scheme members who wish to safeguard their pension. This was done with help from the much more general Pensions Action Group (PAG) - see www.pensionstheft.org for further information.
We should emphasise that we are a group of individuals with our only interest to co- ordinating our efforts towards a common goal of achieving our aim. That is the restoration of our pension entitlements. We speak for ourselves as individuals. In coming together, we hope to pool our knowledge, experience and perspectives, and to optimise our joint efforts towards a successful campaign. In the end, it will be the efforts of us all, as individuals, that will determine the outcome, and the more of us there are engaged, the better.
We recently held a meeting comprising several local members of the AEAT Scheme who had expressed deep concern and had already taken individual action. This was held at RAL Social Club on 28 November 2013 and aimed to review the situation and guide the development of a strategy and an action plan for all Scheme members. We have set up a website aeat.pensioncampaign.info, which provides information and a forum for all members of the Action Group. This has been done by volunteers and we encourage you all to register.
Several members have been actively discussing the situation with their MPs and some have spoken to the Pensions Minister, Steve Webb. If you have not done so already, we encourage you to make your MP aware of the situation and ask him for help to correct this situation. Letters should of course be polite and respectful. Meanwhile, it is the intention to keep you informed of any developments through the website aeat.pensioncampaign.info and by newsletter.
We are determined to act in a cooperative yet responsible way to restore what was promised to us at privatisation in 1996 – a pension scheme ‘no less favourable’ than the previous UKAEA scheme.
What is the union (Prospect) doing to help us?
They are collecting information and they have issued several newsletters, and have also met with the Pensions Minister Steve Webb. They are also consulting their legal advisors. We have been awaiting their response on this for some time, but in the meantime we are determined to move ahead.
Those of the Action Group who are still members of Prospect have been in contact with them to express their concerns about the situation, and to point out the potential wider implications for the employees of privatised public sector organisations. It would help if any Prospect members reading this who are concerned could contact the Prospect Negotiations Officer, Richard Tabbner, and/or the Prospect Pensions Officer, Neil Walsh, at firstname.lastname@example.org
What can you do if you wish to restore your pension?
There are a number of avenues that are currently being pursued by members of the Action Group. Initially, we would urge you to write to your MP to express your concern. You don’t have to write a detailed or technical letter, just say that you think it is unfair and that you are concerned about the future financial security for your family. Some possible bullet points will be placed on our web site as examples. The main point being how we were misled by everyone into joining the AEAT Pension Scheme, which was said to be identical to the UKAEA Scheme, with no explicit indication of the very serious risk involved. On the whole, MPs are sympathetic to our situation, and those with constituencies in which large numbers of those affected live seem willing to help. It is, however, important to show the worry and concern created by this situation is widespread, so your letter will help the campaign.
There are a number of ways to follow this up, such as complaining via your MP to the Parliamentary Ombudsman. Another is to question the way the Pension Scheme has been handled by the Trustees, and a complaint can be made to the Chair of Trustees, or Independent Trustee Services Ltd. (ITS), which is acting as a focal point for the scheme. Their address is The St Botolph Building, 138 Houndsditch. London EC3A 7AW. Their Managing Director is Mr Chris Martin.
Some people already have complaints in motion, but more activity can only help. You can help us by joining the Action Group, and signing up to the web site if you have not already done so, or by making other scheme members aware of the campaign so that we can keep everyone information on where we are with various activities. If you have taken action or if you would like to have your say it would be good to hear from you through the website discussion forum.