Two pension schemes operated under British Coal: the Mineworkers’ Pension Scheme (MPS) and the British Coal Staff Superannuation Scheme (BCSSS). As part of the privatisation, the schemes were closed to new members and all contributions ceased after December 1994.
On privatisation of British Coal in 1994, an arrangement was made between the Government and the trustees of the British Coal pension schemes – the Mineworkers Pension Scheme (MPS) and the British Coal Staff Superannuation Scheme (BCSSS) – on future arrangements for pensions from these schemes after privatisation. The main elements were as follows:
- The schemes closed to new members and all contributions ceased.
- The existing schemes were valued in 1992/93 with half the surplus allocated to the beneficiaries and half to British Coal. An investment reserve was set up with British Coal’s share of the surplus, to be the first port of call in the event of the schemes being in deficit. The investment reserve was to be run down over a period of 25 years through transfers to the Government;
- The Government guaranteed that any pension earned up until privatisation would not fall in cash terms and would increase annually in line with the Retail Prices Index (RPI);
- Scheme valuations would be conducted every three years. Any surplus would be shared 50/50 between scheme beneficiaries and the Government.
- Scheme beneficiaries would be able to benefit from fund surpluses through bonus enhancement over and above RPI-linked levels.
A 1996 National Audit Office report noted that: “The guarantee would be of significant reassurance to pensioners and that the funds were likely to produce a surplus of which the total value of the Government’s share from the two schemes (net of any payments under the guarantee) would be approximately £2 billion (when the net present value of returns is considered to be £8bn in total gross payments)”.
During the years leading up to Privatisation of the Coal Industry, the National Union of Mineworkers (NUM) opposed these arrangements as they did not think it was a fair deal for their members.