400,000 pensioners lose out as pension contributions before 1997 are not inflation-proofed despite pension funds having a £14.1 billion surplus

Unite has called on the government to use surplus reserves in the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS) to inflation-proof pensions. The two funds were set up by government to cover defined-benefit (final salary) pensions at companies which went bust.

Under current rules in both funds, pension contributions paid by workers before 1997 are not inflation proofed at all. That means that a retired worker whose pension was earned before 1997 is only getting 50 per cent of its value. For a worker with an average pension (value of £48,000) earned before 1997, inflation-proofing would increase the total value of the pension pot by at least £24,000.

400,000 retired workers in the UK have pensions held by the PPF or FAS which were earned before 1997. All would benefit from inflation proofing to a greater or lesser extent depending on years worked and pay rates.

There are currently 4,399 pensioners in FAS and 4,782 in PPF in Northern Ireland. This includes large numbers of former employees of Harland & Wolff, Wilson’s Feeds, Visteon, FA Wellworth and British Midland airlines, ECC, Lamont, James Mackie & Sons and Desmonds & Sons. 

Unite says that the need for action is urgent. Approximately 15 retired workers with pensions earned before 1997 pass away each day; however, instead of using a pension surplus of £14.1 billion to deliver pension fairness, the PPF has decided to reduce the employer levy to zero.

Sharon Graham, Unite general secretary said: “It is scandalous that the total PPF surplus reserve has ballooned while pensioners continue to suffer.

“Inflation-proofing pensions would benefit hundreds of thousands of pensioners at no extra cost to the taxpayer. Pensioners who through no fault of their own have been left reliant on PPF or FAS pension funds in their retirement, deserve a fair pension.”

Unite has written to all Northern Ireland MPs calling on them to support its proposals.