£5bn raid on miners' pensions

THE Government is enforcing a nine-year-old deal that allows it to drain billions from miners' pension schemes -even though the funds are heading for a deficit of nearly £1 billion because of depressed stock markets.

And with the Treasury draining the funds at the rate of £400 million a year, the move threatens the pensions of more than 390,000 retired pitmen. Almost £5 billion has been moved out of the funds, according to estimates by the funds' trustees.

The Department of Trade and Industry is insisting on sticking to a 1994 agreement that gives it the right to half the surpluses accumulated by the two schemes since they were closed that year.

The combined assets are £20 billion, second only to the £22 billion BT pension fund.

In exchange for its share of the surpluses, the Government has guaranteed that miners' core pension entitlements will always rise with inflation. But there is a danger that it will have to break this promise if the Government continues to take its agreed share.

On average, miners receive a works pension of £41.50 a week, though some older men get as little as £10 a week.

The latest valuation of the £10 billion Miners' Pension Scheme has revealed a £660 million shortfall, Financial Mail can reveal.

A second scheme, the British Coal Staff Superannuation Scheme, for clerical workers, is expected to show a deficit of about £300 million when the latest valuation is completed at the end of the year.

The schemes' trustees are worried they might be forced to drop inflation-proofing of pensions at a time when falling share prices have mauled the funds' values and more miners are taking pensions.

The apparent paradox that the funds are in deficit, while at the same time there are huge surpluses, is explained by the fact that the money due to the Treasury is released in instalments. And while it is sitting in the bank, it also accrues interest for the Government.

The battle to ensure that miners' pensions are not raided by the Treasury is being led by David Parry of the Coalfield Communities Campaign, an all-party group of more than 80 local authorities in present and former coal-mining areas.

'The Treasury did very nicely out of the funds in the good times,' he said. 'Now that harder times have arrived, it should leave the cash there to benefit the miners.'

The DTI, which supervises the pension schemes, said: 'Under the agreement we reached with the miners, the value of their pensions will never fall in real terms. We've been able to make occasional bonus awards.'