Former UK Atomic Energy Authority employees who transferred to a privatised company have spent a decade seeking resolution from government after their pensions fell in value compared with their previous government-backed scheme, a National Audit Office (NAO) report says.
When AEA Technology (AEAT) – the commercial arm of the UK Atomic Energy Authority – was privatised in 1996 scheme members were no longer eligible to continue paying into the UKAEA public sector scheme.
The 1995 Atomic Energy Authority Act, which facilitated the privatisation of the new body, also addressed pensions, requiring the company’s new scheme to be ‘no less favourable’ than the previous UKAEA scheme for transferred staff.
In November 1996, the pension scheme members were given the following options for the pension benefits they had already accrued:
- Leave preserved pension benefits in UKAEA pension scheme;
- Transfer benefits into a personal pension; or
- Transfer their benefits into the new AEAT scheme; an offer available for only one month
AEAT and the Government Actuary’s Department (GAD) provided information to scheme members to outline their options and the main factors to consider in deciding whether to transfer accrued benefits. GAD’s information did not seek to compare levels of risk, but said the pension benefits promise was unlikely to ever be broken by either scheme. None of the information government or AEAT provided included the fact that the new scheme would not be backed by a government guarantee.
Nearly 90% of members transferred their pension benefits, and some said their decisions were heavily influenced by information from GAD.
After AEAT entered into administration in 2012, the pension scheme was subsequently moved into the Pension Protection Fund (PPF). Compensation provided by the PPF is typically lower than the pension scheme members’ benefits, particularly those transferred in 1996.
Scheme members have been complaining to various parts of government since 2012 and are dissatisfied with its response. Their complaints include claims that the information they were given in 1996 was misleading, and the legal promise to ensure the benefits were no less favourable than the previous pension should include the government guarantee.
Some aspects of the complaints have been investigated by the Pensions Ombudsman or the Parliamentary and Health Service Ombudsman. However, both said they are unable to investigate the complaints about the information government provided in 1996 because it is outside their statutory jurisdictions.
Read the full report
Pensions transferred to AEA Technology when it was privatised