“Canary in the coalmine” – Carmichael leads debate on pensions following constituency concerns

Orkney and Shetland MP, Alistair Carmichael, on Thursday afternoon led a debate in the main chamber of the House of Commons on pension schemes, warning that cuts to pension schemes by companies would be “the canary in the coalmine” for people across the country if the government did not act.

Mr Carmichael previously secured a debate specifically on defined benefit pensions to raise concerns in support of BP pension holders, who have faced a real-terms devaluation of their pensions despite record assets in the fund. Since the debate he has been contacted by pension holders from other companies affected by policy changes.

BP previously followed a policy of protecting its Defined Benefit pensions from being devalued by inflation as long as the UK Pension Fund had sufficient resources. In 2022 and 2023, however, BP blocked the Pension Fund Trustee from following this practice, causing 58,000 BP pensions to fall by 11% in real-terms value. The BP Pensioner Group, which formed in 2023 in response to the change, has voiced concerns that the move is in preparation of BP offloading its pension fund to a third party, and that other companies may follow suit if this happens.

9.6 million UK citizens are members of Defined Benefit pension schemes with total assets of £1.7 trillion. The vast majority of these schemes are in a surplus of assets over liabilities - totalling £359 billion.

Speaking in the House, Mr Carmichael said:

“Although I initially thought that I was dealing with a couple of oil companies, I now see that it is a range of different companies. Ultimately, it will be our constituents, as beneficiaries, who lose out if we get it wrong and if these companies are allowed to do as they wish, rather than as they ought, on the position of their pensioners.

“I will touch briefly on the Work and Pensions Committee report. The Committee observed:

“We note the current consultation on the level of funding a scheme would need to have for surplus extraction to be an option. However, strong governance will also be essential. We recommend that DWP should conduct an assessment of the regulatory and governance framework that would be needed to ensure member benefits are safe and take steps to mitigate the risks before proceeding.”

“In this brave new world for defined benefit pensions, that is a warning that the Minister and the Government would do well to take onboard. We will look back in years to come, and we will see that the cases of BP, Shell, ExxonMobil, Hewlett-Packard and others are simply the canaries in the coalmine.”

Responding to the debate for the government, Pensions Minister Paul Maynard said:

“The right hon. Member for Orkney and Shetland spoke powerfully, once again, about the situation that his constituents face, and he referred to others as well. He spoke powerfully about the situation as he saw it. All of us have constituents who have done the right thing, worked hard and contributed to their occupational pension scheme, so it matters to all of us that they get what they have been promised when it falls due, as set out in the rules of the scheme.

“Since the debate in January, the world has indeed moved on, and I have tried to take some steps as well. As has been said, we published a consultation on options for defined-benefit schemes in February. The consultation is now closed and we are currently analysing the responses.”

“I understand the frustration that will cause for pension scheme members no longer receiving such discretionary increases, and during a previous debate I committed to looking closely at the situation in order to better understand whether the arrangements that we have in place are working as intended. That commitment still stands, and I recently met with the Pensions Regulator to personally discuss the issue, along with many of the other concerns that were raised in January, and indeed some of those raised today.”

Summing up the debate, Mr Carmichael said:

“The function and purpose of debates such as this is to ensure that the concerns of our constituents are heard in Government; the presence of the Minister on the Front Bench is an important symbol of that. 

“The people who run those companies should understand that we are watching what they are doing, that they have an obligation to treat their former workers and their pensioners fairly and that, if they do not have it within themselves to do that, we in Parliament and in Government will make sure that they have to.”