Members of the mineworkers pension scheme will received enhanced benefits due to specific changes announced in this week’s Budget.
The government has confirmed that it will transfer the ‘investment reserve’ fund for this scheme to the trustees with a view to boosting member benefits. This comes after retired mineworkers have campaigned for a number of years for this change to the scheme’s rules.
Commenting on this development Barnett Waddingham’s head of DB endgame strategy Ian Mills says this may serve as a warning though for companies today looking to run-on DB schemes in order to benefit from future fund surpluses.
He says: “The government’s announcement [this week] will undoubtedly be welcomed by retired miners, who have been campaigning hard for this for many years.
“It does, however, give valuable lessons to companies that may be considering running on their DB schemes in order to grow a surplus.”
He points out that when British Coal was privatised back in 1994 the Government agreed with the then trustees that it would underwrite the Mineworkers’ scheme in return for half of the then actuarial surplus, and half of any future surpluses.
However, things generally went better than expected and the surpluses grew and grew, giving weight to calls for members to receive more than half.
Mills says: “The first lesson is that companies should not assume that just because scheme trustees are happy a deal is fair and reasonable that members will be too. The second lesson is that it would be wise to consider how the perception of fairness may change as conditions change, either positively or negatively.”
