State firm siphoned pension fund

NUCLEAR Electric, the state-owned generating company, has milked its pension fund of pounds 70m to finance redundancies, to the consternation of thousands of pensioners.

The Independent on Sunday has learnt that elected trustees of the fund, representing more than 7,000 pensioners, were not properly consulted over the plan to use its surplus to benefit the company rather than the pensioners.

One trustee has accused the company of acting 'immorally, if not illegally', and another alleges that 'what the company has done is to asset-strip the fund'.

The disclosure is bound both to embarrass Nuclear Electric, which is lobbying to be privatised, and add to concern that the Government, which remains responsible for the company, is not committed to defending the rights of pensioners in the public sector.

It comes less than a year after the High Court blocked an attempt by British Coal to use a surplus in its superannuation scheme to pay for redundancies.

Many of the pensioners affected by the decision have no past working involvement in nuclear generation. When the Central Electricity Generating Board was split up, the industry pension scheme was divided among component companies - all of these, except Nuclear Electric, were privatised. Many pensioners now in the Nuclear Electric scheme were allocated to it for administrative convenience. They are incensed that part of its pounds 114m surplus should have been used to its commercial advantage.

Other privatised electricity companies chose to distribute a proportion of their pension surplus to their pensioners. Powergen, for instance, has given a lump-sum payment to existing pensioners and increased the size of its regular pension payments.

Nuclear Electric did improve some terms of its scheme, as a result of the surplus, at the insistence of elected trustees. These include an increase in death-in-service benefits (of no use to existing pensioners), in children's allowances, and in benefits for widows and widowers. Many pensioners have enjoyed no benefit.

Tim Eggar, Energy minister, in a letter to Nigel Jones, Liberal Democrat MP for Cheltenham, has defended the decision to hold back the pounds 70m, insisting that it is legal. Mr Jones, who is to table a series of parliamentary questions, said yesterday: 'I am not at all satisfied. I don't believe a word this government has got to say. Pensioners have been ripped off and they have a right to feel aggrieved.'

Five of six elected trustees to the Nuclear Electric scheme have complained that they were not consulted over the decision. There are three others (who have two votes each) appointed by the company, whose personnel director is also chairman.

In a letter to pensioners protesting over the decision, Eifion Edwards, an elected trustee, said: 'There was no consultation . . . I am disappointed that the company would not listen to reason, and to find that we had no power to influence.'

Norman Varr, another trustee, said last week: 'I'm quite disgusted with it. It was presented to us as a fait accompli and I believe it's quite wrong. Even if it's legal, it's immoral.'

It may not be legal, according to Mark Stephens, a solicitor who acted for the National Union of Mineworkers in its successful bid to stop British Coal pillaging its pension fund. He said yesterday: 'It is very likely that what has happened is inappropriate. I would be very keen to take the case on.'

Nuclear Electric insists that the terms of its pension scheme allow it to use part of the surplus to allay costs of providing early pension benefits to employees made redundant. Normally the company is required to reimburse the pension fund to meet this heavy cost, but it says - as British Coal argued - there is an exemption in the case of a surplus.

Derek Smart, personnel director, said the company's scheme was 'quite different' from that of British Coal. 'It is the company's position that it determines the use of surplus,' he said. It was to the advantage of every pensioner that Nuclear Electric succeeded as a business, and he added that the company was not yet in profit and in fact was 'technically bankrupt'.

He said: 'It would be tempting to use every single penny of the pension surplus to help the company's position. Nobody has lost anything. Not all of them have gained, but they are only worse off in

the short term against other

former colleagues in different schemes.'

Challenged over accusations that the company did not consult the trustees, he said: 'What is consultation? Listening to proposals and each side willing to take (the other) seriously.'