Scheme publications and factsheets
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Common questions raised by members about the Scheme
Are members’ pensions safe?
Yes, the Scheme has a Government Guarantee (also known as a Crown Guarantee). This provides that all members’ pensions, including all current bonus pensions, are safe and will always be paid.
Since privatisation in 1994 the Government Guarantee has been fundamental to the way in which the Scheme has worked and to securing members’ pensions.
In 2021 the Trustees took and considered both actuarial and legal advice on the role of the Government Guarantee and, having reviewed all possible alternatives, confirmed that there are no circumstances in which they could consider giving up the Government Guarantee. It would simply not be in the interests of members to operate without it.
How have members benefitted from Government Guarantee and the surplus sharing arrangements?
Over the years, the Guarantee has enabled the Trustees to adopt an investment strategy that targets high returns.
The investments have generally been successful in generating excellent returns which has resulted in surpluses at some of the actuarial valuations. These surpluses have allowed the Trustees to award extra pensions to members via their 50% share of surpluses, usually in the form of bonus pensions. As a result, the typical weekly pension today is around a third higher than it would have been had no bonus pensions been awarded (based on pensions in payment as at 30 September 2020, the typical pension is £94. If no bonus pension had been paid this typical pension would be £72).
These high investment returns have also benefitted the Government, via their 50% share of surpluses.
Who are the MPS Trustees and Coal Pension Trustees Services?
The MPS Trustee Board compromises ten Trustees, five Trustees who are elected by the members and five appointed Trustees who are appointed by their fellow Trustees. There are no Trustees appointed by the Government.
The day-to-day work of the Scheme is overseen by the Trustees’ executive team, Coal Pension Trustees Services Limited (CPT). CPT is jointly owned by the MPS and the British Coal Staff Superannuation Scheme, with the costs of operating CPT split between the two Schemes.
What are the powers and responsibilities of the Trustees?
The powers and responsibilities of the Trustees are set out in the Scheme Rules and overriding pensions and trust law. The Trustees have a legal duty to act in accordance with these powers and responsibilities and cannot take action which is not permitted under the Rules.
Under the Scheme’s Rules the Trustees have a number or powers and discretions, including how to invest the assets and how to distribute the members’ share of any surpluses. The Trustees must take into account the best interests of all members when making decisions.
The Trustees are required to seek advice on matters where they need expert help including investment, legal and actuarial advice.
The Trustees try to respond to questions or requests for information from individuals or groups that have a valid interest in the Scheme, such as Scheme members, MPs or mining trade unions. In responding to such enquiries, the Trustees are obliged to comply with aspects of general trust law, including a duty to keep certain information that they receive in carrying out their role as Trustees, such as personal or commercially sensitive information, confidential. As such the Trustees will only provide factual, publicly available information to interested groups and individuals.
Who can change the Scheme Rules?
Only the Government has the power to change the Scheme Rules, albeit in certain circumstances the agreement of the Trustees is needed.
Is it against the law for the Government to take money out of the Scheme?
No. The Scheme Rules set out the circumstances under which payments are made to the Government from its share of past surpluses. These payments are permitted by law.
Who will get all of the money from the Scheme when the last member dies? Will it go to the Government?
Under the Scheme Rules an actuarial valuation must be carried out at least every 3 years. At each actuarial valuation the Actuary makes assumptions about future investment returns and expected future pensions payments, to assess whether there is a surplus or deficit. If there is a surplus, part of that surplus is used to enhance members' pensions through the payment of bonus pensions and the remainder is paid to the Government.
In this way the Trustees expect that all of the Scheme's assets will be paid out over the remaining lifetime of the Scheme, so that there will be no money left once all beneficiaries have passed away, currently estimated by the Actuary to be around 2070.
Can the Trustees wind up the Scheme and divide the money between Scheme members?
No. The Trustees do not have the power to wind up the Scheme.
Have any changes been made to the Scheme Rules since 1994 to improve member outcomes?
Since privatisation in 1994 the Trustees have consistently sought to improve member outcomes, both while exercising their fiduciary responsibilities within the Scheme Rules and by seeking rule changes which would benefit members, though the latter has only been possible with the Government’s agreement.
Working within the Scheme Rules:
- The Trustees have invested the assets in a way that has generally been successful in generating excellent returns which has resulted in surpluses at some of the actuarial valuations. These surpluses have allowed the Trustees to award extra bonus pensions to members via their 50% share of surpluses.
- At the 2002, 2008 and 2011 valuations when the Scheme was in deficit, the Trustees were able to borrow from the Investment Reserve so that members’ pensions have never ‘stood still’ and have therefore almost always increased from one year to the next.
Seeking the Government’s agreement to change the Scheme Rules:
- In 2013 the Trustees and Government agreed to extend the ‘life’ of the Investment Reserve, which had been due to end in 2019, so that it could continue to play a valuable role in helping to avoid pensions ‘standing still’ in the event of a future deficit.
- At the 2017 valuation, the Trustees negotiated a six-year ‘deal’ which meant that the total pension could be expected to increase by at least 4.2% of guaranteed pension in each year from and including 2018 to 2023.
- More recently the Trustees succeeded in protecting bonuses so that all bonus pensions built up to 2023 will also be covered by the Government Guarantee, so that they can’t be lost.
The headline outcome for members of all the above initiatives is the fact that bonus pensions have been consistently paid since 1994, with the typical weekly pension currently around a third higher than it would have been had no bonus pensions been awarded (based on pensions in payment as 30 September 2020).
The Trustees have also asked the Government to reconsider the terms of the surplus sharing arrangements on a number of occasions since 1994. On each occasion the Government has declined the Trustees’ request.
What were the main recommendations made by the Business Energy and Industrial Strategy Committee (“the BEIS Committee”) following its inquiry into the Scheme in March and April 2021?
In its report the BEIS Committee recommended that the Investment Reserve should be used to provide an immediate cash uplift to pensions and that all future surpluses should be distributed to members by default, with the Government only receiving surplus monies in future if the Scheme has previously fallen into deficit and the Government has had to provide funds.
These changes would improve members’ pensions, by allowing the Trustees to provide an immediate increase in pensions and by enabling the Trustees to declare bigger bonus pensions in the event of future surpluses. Naturally the Trustees are supportive of such changes.
However, the Trustees do not have the power to implement these changes without the agreement of the Government and, to date, the Government have rejected all of the BEIS Committee’s recommendations.
Is the Government bound to implement the recommendations from the BEIS Committees Report?
No, the Government is not bound to implement any of the recommendations outlined in the Report.
Will the Trustees continue to seek changes to the Scheme Rules that will improve member outcomes?
The Trustees continue to seek opportunities to improve outcomes for members. This includes engaging with the Government and the Trustees would of course be supportive of changes to the Scheme arrangements that would improve members’ pension outcomes.