Power firms face pension fund fury: Privatised companies are outraging pensioners by using scheme surpluses to prop up profits. Tim Kelsey reports

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The Independent Online
PRIVATISED electricity companies are propping up their profits with surplus funds diverted from their pension schemes, causing outrage to pensioners. Some elected pension fund trustees have claimed that they were not consulted about this use of surpluses.

All of the companies that were once part of the Central Electricity Generating Board have benefited from surpluses earnt through employee pension funds. Most, but not all, have returned some in improved benefits to pensioners. Pensioners of London Electricity have not benefited at all from the surplus, which has been used instead by the company partly to meet costs associated with redundancies and as a contingency fund.

A spokesman dismissed complaints that the company had acted immorally, exploiting the fund for its own commercial interests. He said: 'Pensioners received good benefits from the scheme as it is.'

The Independent on Sunday reported last month that Nuclear Electric, the nuclear generator which is still state-owned, had used pounds 70m from its pension scheme surplus to fund the cost of redundancies. The High Court ruled last year that British Coal was acting illegally in using part of its pension fund for the same purpose.

Nuclear Electric has denied that it acted illegally. Five of the six elected trustees of the Nuclear Electric scheme have, however, complained they were not properly consulted over the use of the surplus. Nigel Jones, Liberal Democrat MP for Cheltenham, where the company has its headquarters, has accused it of 'ripping off' pensioners.

It has emerged that the privatised electricity companies, both generators and distributors, have been using part of their pension fund surpluses to their commercial benefit.

In total, the surpluses - revealed after a valuation last year - amount to about pounds 1bn. Much of this has been diverted to company uses. A league table drawn by up the GMB general workers' union, which represents many of the existing and future pensioners affected, shows that London Electricity used 100 per cent of its pension fund surplus for its own purposes. Norweb retained 95 per cent and Nuclear Electric 85 per cent.

What has most angered pensioners is that much of the surplus was earned on contributions made before privatisation, when there was one central fund for the whole industry. After privatisation, pensioners were allocated to different company funds according to the area in which they lived. They complain that their benefit levels vary according to this allocation over which they had no choice.

Aled Pugh, a Nuclear Electric pensioner and former research scientist, is campaigning with 110 other pensioners against the company's use of the surplus.

'We were all in this scheme before privatisation when it was split up among the companies,' he said. 'Each company has treated the surplus differently - some pensioners have literally been given pounds 6,000 while others, people who worked side by side, get nothing.

'People are very angry. It is obviously immoral; and it must not happen again.'

Donald MacGregor, national secretary for the electricity workers, said: 'It is outrageous that tax payers' money, paid into employee pension schemes when the power companies were state owned, is now being used to prop up share prices, while pensioners struggle to pay their heating bills.'

The electricity companies are using pension money to meet the costs of providing early pensions to those made redundant before retirement age - normally a cost that the company would meet directly.

(Graphic omitted)

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