Tories slam miners’ pension accounting

The government has taken advantage of actuarial assessments of the
Mineworkers’ Pension Scheme and British Coal Staff Superannuation Scheme using
an ‘expected return on assets’ basis to siphon off £419m last year, according to
the annual report and accounts of the Department for Business, Enterprise and
Regulatory Reform.

The deduction was made under an arrangement decided when British Coal was
privatised in 1994 under which the state guarantees future payments from the two
funds allowing valuations by the government actuary to be made on an ‘expected
return on assets’ basis instead of the more usual index-linked gilt rate.

It has seen a total of over £4bn removed from the funds in what Tory
Treasury spokesman Phillip Hammond has warned is the ‘opposite of the prudent
approach’ and ‘a reckless strategy’ that could land future taxpayers with a huge
liability in the event returns are lower than expected.

He called for an urgent review of the treatment of the funds, worth an
estimated total of £27bn, in a deal concluded under the Thatcher government
which entitled the state to 50% of all surpluses with the other 50% used to
enhance payments to pensioners.

Despite having no contributing members, the two schemes are 70% invested in
equities instead of the government gilts favoured by other schemes in a similar
position, with 250,000 of its 350,000 members already retired.

The disclosure has caused the National Union of Mineworkers and other miner
pensioner campaigners to step up demands for the government to end deductions
which John Ralfe, the independent pensions consultant, has warned are based on a
‘fictitious’ surplus of £1,600m which he believes is actually a £900m deficit.

But DBERR said the valuation of the schemes is in the hands of the government
actuary and the treatment of funds is based on ‘appropriate actuarial guidance’.

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