The case of the miners’ pension fund is back in the news – where it should be. Here are the facts:
Although the infamous strike of 1984/85 is now just a distant memory for most of us, British miners have a new reason to worry about their future. In 1994 the coal industry was privatised, and shortly afterwards a deal was struck with the then Tory government to underwrite the miners’ pension scheme, the idea being to protect the miners’ money, and the scheme would be linked to inflation. So far, so simple. But there’s always a catch, and that was the government would be able to take half of any extra money that was generated. Faced with this dilemma, and a future that offered more uncertainty, they chose to accept the deal. And then things got a bit tricky.
In 2003 it was revealed that the government had benefited very nicely from the deal, thank you very much. However the miners were facing a £1bn shortfall (thanks to capitalism), but despite this the government still demanded its share. This wasn’t monopoly money, but the retirement funds for nearly 400,000 miners, and yet the scheme was showing a £5bn deficit.
In other words: during the good times the government will have its money; during the bad times the government will have its money. And by the time Gordon Brown was in Downing Street the government had made £3.5bn from the scheme. But that’s not the worst of it because even the catch had a catch. And this is where it gets very tricky, and thanks to a Freedom of Information request by a pensions expert, it was revealed in 2008 that the money the government was creaming from the miners’ pension account did not actually exist, but was based on betting on the market. Richard Fletcher, a Telegraph journalist put it this way:
“The schemes currently have a combined £1.9bn surplus. Based on an “expected return on assets” calculation by the actuary [a person who compiles and analyses statistics and uses them to calculate insurance risks and premiums]. But, on the basis of the index-linked gilt rate, that surplus becomes a £900m deficit. The payments…are being made from “fictitious surpluses”. And it’s not just the calculation of the surpluses…we should be worried about. Despite being mature schemes, with the vast majority of members collecting their pension, 70% of the funds’ assets are held in equities.”
So this literally was Monopoly money after all. The government essentially hazards a guess as to how much money they should fleece the miners for and acts accordingly. And what has the government put in to guarantee such riches? Nothing. Not a penny. And in the meantime retired miners can look forward to an ever-dwindling pot.
Max Webster is the editor of Political Provocateur