MPS trustees will ask minister for 100% of surplus
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The Mineworkers’ Pension Scheme trustees are planning to meet with the industry minister next month to ask for his support for all surplus going to members, and for protecting the pension bonuses resulting from the 2024 transfer of the £1.5bn investment reserve.
The trustees said they will meet with Chris McDonald at the Department for Energy Security and Net Zero in February, to ask the minister to support their proposals. They have already had several meetings with government representatives about their demands, to which the Treasury will need to agree.
Labour had pledged in its election manifesto to hand the MPS investment reserve to the scheme, making good on this pledge almost as soon as it came to power. A further promise to review the current 50/50 surplus sharing arrangement between the government and the taxpayer-backed scheme has so far not resulted in a decision.
However, the trustees of the roughly £10.5bn scheme are continuing to lobby the government for surplus sharing. In late 2024, they wrote to ministers demanding that 100% of surplus should go to members as bonus pensions, while about £1bn earmarked to be paid to the government from earlier surpluses “should instead be kept in the scheme to provide extra bonus pensions for members”.
In addition, they want the bonuses paid out from the 2024 deal to be “protected from any future reductions, even if the scheme later moves into deficit”, as is already the case for other bonuses paid to members. The £1.5bn transferred in October 2024 resulted in a 32% bonus for roughly 112,000 members – about £29 more a week on average.
The trustees said they will meet with Chris McDonald at the Department for Energy Security and Net Zero in February, to ask the minister to support their proposals. They have already had several meetings with government representatives about their demands, to which the Treasury will need to agree.
Labour had pledged in its election manifesto to hand the MPS investment reserve to the scheme, making good on this pledge almost as soon as it came to power. A further promise to review the current 50/50 surplus sharing arrangement between the government and the taxpayer-backed scheme has so far not resulted in a decision.
However, the trustees of the roughly £10.5bn scheme are continuing to lobby the government for surplus sharing. In late 2024, they wrote to ministers demanding that 100% of surplus should go to members as bonus pensions, while about £1bn earmarked to be paid to the government from earlier surpluses “should instead be kept in the scheme to provide extra bonus pensions for members”.
In addition, they want the bonuses paid out from the 2024 deal to be “protected from any future reductions, even if the scheme later moves into deficit”, as is already the case for other bonuses paid to members. The £1.5bn transferred in October 2024 resulted in a 32% bonus for roughly 112,000 members – about £29 more a week on average.
MPS and BCSSS point to each other
The request for bonus protection is inspired by the deal the sister scheme of the MPS agreed with the government, the British Coal Staff Superannuation Scheme.
The £8.6bn BCSSS was not mentioned in the Labour manifesto, but its trustees had, in turn, based their demand for transferring the scheme’s £2.3bn investment reserve on the fact Labour had given up the MPS reserve.
The government eventually agreed to pay out the BCSSS reserve at last year’s Budget. The scheme has about 41,000 members, meaning members and dependants are seeing generous 41% pension bonuses, backdated to November 2024 - on average, a top-up of £100 a week and a one-off lump sum of £5,500.
The government eventually agreed to pay out the BCSSS reserve at last year’s Budget. The scheme has about 41,000 members, meaning members and dependants are seeing generous 41% pension bonuses, backdated to November 2024 - on average, a top-up of £100 a week and a one-off lump sum of £5,500.
Who has benefitted?
Last month, the government also said it will meet with the trustees of the BCSSS in the new year “to agree a way forward with surplus sharing arrangements”.
The BCSSS surplus sharing arrangement ended in 2015, when it was also agreed to protect bonus pensions, but the government is due another payment from BCSSS of £1.9bn in 2033. Between October 1994 and July 2024, the government received £4.8bn from the MPS and £3.1bn from the BCSSS under the sharing arrangements.
Ministers say the changes to the schemes serving unionised voters in former industrial heartlands put right “an historic injustice”. In 2021, a parliamentary committee called the 50/50 split of surplus sharing “arbitrary”, as the government had not taken actuarial advice before imposing the split. What is more, other privatised industry schemes enjoying a guarantee have no surplus sharing arrangement at all, such as the BT Pension Scheme.
The BCSSS surplus sharing arrangement ended in 2015, when it was also agreed to protect bonus pensions, but the government is due another payment from BCSSS of £1.9bn in 2033. Between October 1994 and July 2024, the government received £4.8bn from the MPS and £3.1bn from the BCSSS under the sharing arrangements.
Ministers say the changes to the schemes serving unionised voters in former industrial heartlands put right “an historic injustice”. In 2021, a parliamentary committee called the 50/50 split of surplus sharing “arbitrary”, as the government had not taken actuarial advice before imposing the split. What is more, other privatised industry schemes enjoying a guarantee have no surplus sharing arrangement at all, such as the BT Pension Scheme.
The MPS trustees believe “members earned these pensions, and they should not be taken away”.
However, critics have said the MPS and BCSSS pensioners have received all the pensions they were promised, including some bonuses, with no legal entitlement to further bonuses which could increase the risk of a future taxpayer bailout.
The former Conservative government had argued that it was the Crown guarantee that had allowed the accumulation of the surpluses in the two schemes in the first place, because this allows them to run higher risk investment strategies than other closed defined benefit schemes.
In 2024, the MPS had the largest chunk of its assets in listed equities, followed by private equity, property, high yield credit and special situations debt. It also held more private debt than government bonds in its portfolio. Last year, the scheme told members it “is always looking ahead to make sure the portfolio continues to grow. We need that growth in order to have the best possible chance of delivering member bonuses”.
At the BCSSS, while the largest part of the assets was in fixed income and liability-driven investments, last year the scheme held more than £1.5bn in listed equities, as well as about £800m in private equity, along with smaller allocations to private debt, special situations debt, high yield credit, commodities, shipping and hedge funds among others.
The Government Actuary’s Department carries out the valuations of the two schemes, with government actuary Fiona Dunsire writing that the BCSSS fund is sufficient to meet the scheme’s obligations for a period “well in excess of three years”. In 2024, the total annual pensioner payroll was £596m. The 2023 valuation of the MPS was not readily available.
