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Ros Altmann: How the EU has protected our pensions

Ros Altmann

Most people involved in pensions probably understand the risks of leaving the EU.

The risks to our economy, to future jobs and growth, to our national security are all significant and the uncertainty that would result from a vote to leave would undoubtedly unsettle financial markets.

That means pensions would be hit too.

But I think it is also important for the public to understand the advantages of being in the EU.  The European Union has helped ensure better protection for people’s pensions where relying on British law failed.

A big benefit of the EU is its protection of workers’ rights.

Back in 2000, I worked at the Treasury on the Myners Review of Institutional Investment and discovered that the so-called Minimum Funding Requirement for UK defined benefit pension funds was not working properly.

I wrote about it and gave speeches about it to the pensions industry, warning that the MFR did not properly protect workers’ pensions if their scheme collapsed.

Three things were particularly dreadful about this.

Firstly, the Government had itself assured pension scheme members that their pensions were completely safe and protected by law after the Maxwell debacle – yet this was not actually true.

Secondly, in those days, workers were not allowed to have any other pension savings. If you were in your employer’s pension scheme then all your own pension savings (additional voluntary contributions) had to be put in there too, so members’ entire life savings were often in their pension fund.

Thirdly, as most of these pension schemes were contracted out of the state pension, some of the members’ state pension was in their employer scheme too.

The reality was that the MFR did not ensure there was enough money in UK pension schemes to pay all members’ pensions. UK law said all the money in the pension scheme must first buy annuities for pensioners, including full inflation-linking – even if those ‘pensioners’ were actually top directors in their 50s who’d taken ‘early retirement’ to secure their own position at the expense of their loyal workforce before putting the pension scheme into wind-up.

Workers who were just a week away from retirement could lose everything if there was no money left after buying pensioners’ annuities.

Which is precisely what started happening.

After the dotcom crash, pension schemes like Allied Steel and Wire started failing.  I met devastated workers in their 60s who had believed the Government promises of protection, trusted that British law had looked after their pensions as promised and suddenly found they were left penniless for the rest of their lives.

Having moved from the Treasury over to work with the Number 10 Policy Unit, I tried to help the Government see it had to remedy this situation. I helped lead a campaign with these ‘stripped’ pensioners, together with MPs and unions, to get the law changed.

After a couple of years, we got the Pension Protection Fund established and a major reason for achieving that relatively quickly was that the UK had failed to meet the EU protection requirements.

Article 8 of the EU Insolvency Directive requires member states to properly protect workers’ pensions. Britain had said the MFR would do this, but that was not true.

I recognised then that we were fortunate to have the added layer of protection provided by the EU.

Europe is good at protecting workers’ rights and I am delighted that these workers, who faced a retirement in penury, are now protected thanks in part to the protections of being in the EU.

It is important to recognise that there are benefits of being part of a larger club and, in our increasingly globalised world, dominated by countries the size of continents, being a gateway to a 500 million person market gives us far more power and protection than going it alone.

I fervently hope we won’t throw that all away.

Ros Altmann is pensions minister


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There are 22 comments at the moment, we would love to hear your opinion too.

  1. So we vote to stay and in the not so distant future we will have to adopt the Euro. So 25% of the value of your investment lost over night. Why is no one talking about this issue? No one seems to want to talk about if we stay the capital of the EU is Brussels, how long before all the financials move from London to there? No one wants to talk about that!

    I frankly believe no one knows what will happen if we leave, but they do if we stay!!!!! The only thing I am certain about is when so many civil servants, MEPs, MP’s, World Leaders say we should stay, I know its not in my interest, BUT THEIRS!!!!

  2. Sascha Klauß 9th June 2016 at 1:10 pm

    I feel a bit sorry for Ros who has been ordered by her masters in the Government to disown the years of hard work she has put in on behalf on UK workers and pensioners, and instead give the credit to faceless EU bureaucrats who couldn’t give 2/80ths of a toss.

    The situation was, as she eloquently lays out, intolerable – and that would be the case whether there was a vague EU directive about it or not. It wasn’t Article 8 that put the Pension Protection Fund in place but concerted lobbying from Ros and others.

    Still, if you will lie down with dogs.

  3. Spare us the condescending political lectures, Ms Altman. This is supposed to be a trade mag!

    The NAPF submission to DWP in 2012 stated a Solvency II style approach represented the biggest threat to UK DB schemes. You were challenged on TV about the current format and went very silent.

    The UK implements greater worker’s rights than stipulated by the EU. You know this, of course.

    Unemployment amongst most EU member states is appallingly high. Especially amongst the young. What sort of worker protection is that?

    No wonder your campaign is in big trouble.

  4. She really isn’t very good is she? The “Insolvency Directive” she refers to is Directive 2008/94/EC. If you’re unfamiliar with EU legislation, this means that it was agreed in 2008 (22 October, to be precise). By contrast, anyone who recalls UK pensions law however will be aware that MFR was replaced by the ‘statutory funding objective’ and the like by virtue of Part 3 & Sch.13, Pensions Act (2004). This was four years prior to the EU’s supposed intervention. No, the EU does not protect our pensions.

  5. What Ros appears to be saying is that she lacks the competence to be able to formulate a robust policy herself and so she relies on the EU to do it for her. I find that rather disappointing.

  6. Having given pension advise since the early 70’s IMHO the biggest problem with pension savings has been government tinkering. When we were told in 2006 that pension simplification would sort out the problems we had one and a half times private pension funding than the rest of Europe put together. Whilst Government DB schemes had no money at all, but are payed from general taxation, in other words a ponsy scheme.
    Over the years when markets have been down government actuaries have forced pension levies on DB schemes, when markets were up and funds were over funded Government taxed those schemes that were seen to be over funded, so many employers reduced funding.
    Hence most of the private DB schemes closed down, or stopped new entrants.
    The PPF has paid out £2.3 billion since 2008 but have received levies of over £5 billion pounds, further reducing pension funds. ( figures taken from the PPF website)
    The EU cannot even get its own accounts signed off and have wasted Billions of pounds of UK tax payers money and has always wanted to get their greedy mitts on our private pensions
    Then the regulators and Hutton decided to have a go at private and personal arrangements brought in stakeholder schemes which reduced pension savings by around 65% and have totally screwed up the the pensions market.
    Now we have a further imposed compulsory scheme or (stealth tax) on all businesses and a flat rate pension with an earnings related National Insurance sceme still taking the same amount but not paying it out.
    I have always respected Ross but to use pensions to make a political (Remain) point is just posturing.
    We need to get out of the EU before it’s total collapse, which will happen sooner rath than later.
    Last but not least the FCA has reduced pension advise from in the region of 119,000 advisers in 2006 to 29,000 and created a void for ordinary working people to seek advise, whilst their spending has increased to £1 billion and that does not include the FSCS or FOS budgets paid for by the Industry. None of which is paid for by (a government Guarantee)

  7. paolo standerwick 9th June 2016 at 2:36 pm

    Ros, I never thought I would see the day when I would totally disagree with you, but here it is. The UK used to have the most successful privately funded pension schemes in the world and more money in UK pension schemes than the whole of Europe together. Thanks to Crash Gordon when he started to apply retrospective legislation e.g. raid our pensions, successive governments have followed suit with other ridiculous methods of penalising pension savers.

    Regardless of the EU’s position, and/or any directives. We can run our own Pension Protection Funds, make our own laws and rules. I would rather allow an elected body make these decisions for me than an unelected one who refuse to have their accounts signed off.

    As far as the Maxwell scandal is concerned, the government made a mistake by controlling how much surplus was allowed to be kept in DB pensions. All they had to do was make it illegal for the predators to strip out any surpluses.

    Politics gets in the way of everything that could have been straightforward.

  8. Mike is so right. Why are we paying RA if she cannot formulate and implement her own policies? The Gravy Train come to mind.

    On Fear – Mario Draghi’s Quantitative Easing (€80bn p.m.) is described by most “the greatest financial experiment of all time” which no one knows quite how it will pan out, but Brexit is according to RA a disaster.
    These are the people that keep lending Greece more and more money so that they can pay the interest on the current loans we gave them, knowing that they will have to write off most of it anyway. It is like giving an addict a fix so they become more dependent upon you.
    Our Political classes seem to be rather dependent upon the EU and unable to stand up for themselves.

  9. Pensions will be affected much more by every new chancellor who decides that he wants to save tax, confirm the distrust of the general public(GP) and ‘simplify’ the process. LEAVE PENSIONS AND PENSION COMMENTARIES ALONE PLEASE! Most of the GP do not know how they work and therefore already distrust them as they are, especially with AE, now seen as an Employer/Govt scam of some sort.

  10. No comment about protected Tax Free cash, MVRs (34%+) or tax /death penalties at age 75 then?

  11. Finian Manson 9th June 2016 at 4:21 pm

    Disingenuous to say the least on the part of Baroness Altman! How easily people are corrupted by peerages and other baubles. The payroll vote doing as it is told once again! What happened to integrity?

  12. More nonsense, as others above have pointed out. It’s almost inevitable now that the EU will break up – recent polls in France and Italy show that a majority there are in favour of referenda in their own countries and also that in the event of that happening a majority would vote to leave. So, a vote in the UK to Remain on the 23rd will merely kick what little that’s left of the ‘can’ down the proverbial road one last time.

  13. A vote to leave would ‘undoubtedly unsettle financial markets’………………oh PLEEEEEZZZEEE

    Because we have never had ‘unsettled financial markets’ when we have been in the EU have we???

    Stop scare mongering. The only certainty about the future is uncertainty. so dont try and con the elctorate into thinking there is any certainty in remaining. There isnt.

  14. On the other hand Edi Truell, former chairman of the London Pension Fund Authority and founder of the Pension Insurance Corporation, has said that proposed new EU tax legislation will impose costs of many billions of pounds on UK pension schemes, and warns we must vote for Brexit to avoid the threat. This is all part of the EU taxation proposals. So who do you believe?

  15. Andy Robertson-Fox 10th June 2016 at 9:59 am

    EU Law currently protects the index linking of the State Pension of some 400,000 UK pensioners who live in EEA countries. There is no guarantee that this will continue in the event of Brexit and they may well be lıke the 560,000 who are subjected to frozen pensions; in fact the whole Social and Welfare structure for all Britons living in EU countries is clearly at risk.

  16. Ros’s dialectic centres around the private sector pensions and workers’ rights. What is not mentioned is that the free movement has allowed our population (which was moribund) to increase to a level where future State Pension benefits (meagre as they are) can be continued to be paid out.

    Unfortunately, the UK still pays the lowest State Pension in the OECD (bigger than the EU) as measured by the percentage of national average salary. The generally regarded parsimonious US in this respect, is streets ahead of us.

    For me Ros’s perpetual failure to highlight the failures of the state pension is her greatest fault. Instead of the deceitful and pernicious tax that is AE, there should have been a real effort not only to reform, but also to improve the State Pension. Abandoning earnings related – by of all people a Tory Government – was almost a Communist measure.

  17. Ros says :
    “Europe is good at protecting workers’ rights and I am delighted that these workers, who faced a retirement in penury, are now protected thanks in part to the protections of being in the EU”
    Totally false with respect to to state pension ! How about the many current ex-pats around the world along with many BME workers from various places mostly Commonwealth countries who earn the right to the state pension over a working lifetime that are denied the indexation that they have paid for ?
    She is a total failure and I would not want her to work for me as she is being dishonest and hiding the truth. At least Steve Webb admitted that the UK were freeloading off some of the countries where the state pension is frozen.

  18. I saw this and thought that anyone in doubt about the cash that the EU give us back might influence their decision when voting.
    Peter Bone Conservative, Wellingborough (From Hansard )
    The Prime Minister has said that the EU budget has been cut, so I thought that I would check with the House of Commons Library. I do not think that these figures have been published, but according to the Library our net contribution to the European Union will increase by more than £2.7 billion this year—to £2,727 million. That does not seem to be a cut, so may we have a statement from the Government next week explaining the situation?
    This will happen year on year – you can bet.

  19. Considering your preaching to experts Ros, at least try sticking to the truth, try both sides of the argument, something most of your colleagues in the remain camp have 100% failed to do, which you have clearly also failed to do here.

    Considering that you’ve never been elected to any office, there is an expression that springs to mind Ros. Shut up.

  20. Julian Stevens 14th June 2016 at 7:21 pm

    The EU has manifestly failed to protect Brit’s from 30 years of prejudicial and cack-handed government meddling with the pensions system. With a now frozen LTA, the incentive for young people to save is lower than ever.

  21. George are you sure about those numbers.

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