Nuclear sector DB schemes reform to go ahead after 5-year delay

The Nuclear Decommissioning Authority is responsible for cleaning up and decommissioning the UK’s earliest nuclear sites. It is responsible for two final salary schemes — the Combined Nuclear Pension Plan and the SLC section of the Magnox Electric Group of the Electricity Supply Pension Scheme — which currently have around 8,000 members.

In 2011, Lord Hutton’s public sector pensions review recommended career average revalued earnings schemes as the quickest way of ending “the inbuilt bias against those public service employees whose pay stays low over their career, inherent in final salary schemes”.

Most public sector schemes were reformed since then, and the two NDA pension funds also fall in scope for reform, for which a consultation was launched in 2017.

Members were put in the appalling position of having to choose between this scheme and the threat of even worse reforms being imposed by government, and therefore many members reluctantly voted in favour

Sue Ferns, Prospect union

New legislation is required to reform the schemes, since pension protections were introduced for parts of the workforce at the time of the privatisation of the electricity sector and the creation of the NDA, which limit the latter’s ability to change its pension scheme members’ benefits and contributions. 

The Department for Business, Energy and Industrial Strategy and trade unions agreed on a bespoke Care benefit structure, retaining the normal pension age as before – for most members at 60 – and not linking to the state pension age as it occurs in the other reformed public sector schemes.

A consultation about the new schemes was then launched in 2018, with the government estimating savings of £200mn with the move, on the basis that members started contributing more and accruing lower benefits from April 2018.

However, the legislation initiating the schemes was never introduced in parliament, after the Conservative party lost its majority in 2017 and parliament was dominated by Brexit legislation.

The proposed reforms have now been introduced as amendments to the energy bill, which were approved at committee stage at the House of Lords on January 16.

Conservative peer Baroness Bloomfield of Hinton Waldrist said: “I am afraid there has been a delay in implementing these reforms, purely because the energy bill has provided the first opportunity to make the change since the agreement with the unions. Previous legislative vehicles were considered but were not deemed appropriate for these clauses.”

Labour questions schemes’ reform

In the debate, Labour peer Baroness Blake of Leeds questioned whether the new legislation would “break promises of previous governments, going way back, in relation to nuclear workers’ pensions”.

“The statutory pension protections that parliament previously legislated for were vital to the success of privatisation. Is it right for the government to promise those protections to ensure that success, and then to rip them up that many years after the event?”

The Magnox Electric Group of the Electricity Supply Pension Scheme was created after the privatisation of the electricity industry in 1990 and has been closed to new entrants since 2007. The Combined Nuclear Pension Plan was set up in 2006 as the industry-wide arrangement for eligible workers in the nuclear decommissioning industry, also closed to new members.

In both cases, protection arrangements were put in place at privatisation, which required the new employers to provide pension benefits for staff employed at the time that are “at least as good as those they were receiving in the public sector”, and preventing them from making changes that reduced future accruals or increased employee contributions.

Since 2006, new starters have been offered membership to a defined contribution scheme.

Blake said: “Is it accurate to claim that these reforms would bring pension provision across the NDA group into line with wider public sector pensions? These pension schemes underwent much more radical reform long before my noble friend Lord Hutton’s review of public sector pensions.”

She added that Bloomfield “recommended that public sector pension accrual should remain on a defined benefit basis, but pension provision across the NDA group is mostly on a DC basis”.

While reiterating that the proposed reforms offer “a very good pension”, as it “allows full pension awards at [age] 60 for the majority of members, whereas most public sector pensions are linked to the state retirement age”, Bloomfield said she would respond to Blake’s questions in writing.

Pensions Expert understands that Prospect union – one of the unions involved in the agreement made in 2017 – is reviewing the amendments to the energy bill to see whether it follows the deal agreed by members at the time.

Prospect senior deputy general secretary Sue Ferns said: “While it is true that union members voted in favour of the new Care scheme, this should not be interpreted as members supporting these reforms.

“Members were put in the appalling position of having to choose between this scheme and the threat of even worse reforms being imposed by government, and therefore many members reluctantly voted in favour.

“This government’s approach is a disgraceful betrayal of promises made by previous governments – both Conservative and Labour – to safeguard nuclear workers’ pensions after privatisation.”

A BEIS spokesperson said: “The fact is that trade unions voted in favour of the pensions reforms in 2017 and implementing these reforms will bring the Nuclear Decommissioning Authority salary pensions into line with the rest of the public sector. This ensures those affected retain an excellent pension and protects taxpayers.”