The government is planning to approve a proposal that will guarantee members of the Mineworkers Pension Scheme an annual increase in line with the retail price index even if there is a deficit in the pension fund.
Business minister Andrew Stephenson said in a backbench debate yesterday (June 10) the guaranteed increases were one of the six proposals made by the trustees of the pension scheme which are now being analysed by HM Treasury.
He said he supported the proposals, and that without this additional guarantee "members may not be able to get any increase in payment, possibly for many years".
However, the government won’t make changes to the current surplus rules of the scheme, which see the government pocket half of excess funds in return for acting as a guarantor of the pension scheme.
Mr Stephenson said: "The proposals put to my predecessor by the trustees offer benefits to all pensioners, who will see their pensions secured into the future, even if the scheme was to go into deficit, by protecting the bonuses that have accrued to date.
"The trustees, who include former miners, believe that that is an important way of protecting future revenues for scheme members in the event of a future scheme deficit, because bonuses accrued at past evaluations could be eroded."
When British Coal was privatised in 1994, it was agreed the government would act as guarantor for the MPS.
As part of the deal, any surplus is split equally between members, in the form of bonuses, and the government, which guarantees the scheme.
In 1996 it was estimated the pension fund would generate a £2bn surplus over the next 25 years but the schemes have performed considerably better than expected.
Over the years, the government’s guarantee has enabled the scheme trustees to adopt an investment strategy that targeted high returns, which have resulted in surpluses.
The MPS has currently more than 152,000 members, of which some 135,000 are pensioners, the rest are deferred.
Stephanie Peacock, Labour MP for Barnsley East, said at the debate that since the scheme was established, the government "has pocketed more than £4.4bn, with nearly half a billion more over the next three years planned".
She added: "Yet since 1987 the government have not paid in a single penny, and instead claim their undertaking as guarantor makes this a fair price worth paying.
"In return, the average retired miner must get by on about £84 a week, while some are forced to settle for much less."
Mr Stephenson said the scheme trustees felt that protecting existing bonuses earned was "more important than a review of the 50/50 split at this time".
He noted whether a review is undertaken was a matter for the Treasury, which stood by its previous position.
He said: "[…] The current position, whereby the government guarantee arrangements and split the surpluses, is a fair settlement.
"It is reflected in the fact that successive governments of all political persuasions have retained the split currently in place."