THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE. MONEY BOX Presenter: Paul Lewis TRANSMISSION Sat 21 November 2004 1200 – 1230 RADIO 4 __________________________________________________________ ANNOUNCER : Now on BBC Radio 4 FM time for MONEY BOX with Paul Lewis. LEWIS: Hello. In today's programme... New hope for victims of pension wind ups as the Ombudsman steps in to investigate claims of misadministration. In Parliament campaigners fail to get more freedom over what we do with our pension funds Banks in Northern Ireland come in for tough criticism….. MAN: These respective pillars of society are the modern day pick-pockets. They can come and go at will with your money. And Louise Greenwood's with me today… GREENWOOD: Reporting on how one and half million parents can start planning where to invest the £250 that's on the way for their child. LEWIS: But we start with the news that there is some hope of compensation for the 65,000 or more people who have lost much of their company pension after their employers ran into financial difficulties and the pension scheme was wound up. The Parliamentary Ombudsman announced on Tuesday that she is to investigate several government departments. One accusation is that they published inaccurate information, which led people to believe that salary related company pensions were always safe. Something we now know is not true. Among those complaining to the Ombudsman was Alan Marnes. He'd paid more than £36,000 into his scheme during his working life but now he will get no pension at all. MARNES: I’ve written to the Ombudsman to complain about the thousands of us that have lost our pensions. We believed the government literature that said our pensions were safe. They gave us all assurances and guarantees that our pensions would be safe. We believed the government and now we have lost everything. I have worked 38 years for the company. I stood to get two thirds of my salary as a pension when I retired I have now nothing. LEWIS: And the dangers were illustrated again this week as it emerged that 3000 more people would not get the full pension they had been promised. A thousand of them have worked for the electronics company APW. They could lose up to 80 per cent of their pensions. And another 2000 members of the pension fund of Henleys - the bus and coach maker - may only receive a third of the pension they expected. In each case the company and the pension fund trustees agreed to wind up the pension scheme as an alternative to the company going bust. Melvyn Trotter is one of the Henleys workers TROTTER: It was an absolute shock to everybody. Nobody had any idea that the pension was in that much difficulty. People are coming up for retirement age and have lost 23 years of service, and obviously we’ve got Christmas. I’d really like to see the government take some sort of responsibility. LEWIS: Well many of these people say the Government must take some of the blame. And if the Parliamentary Ombudsman finds there has been maladministration by government departments she can order compensation to be paid - which could run into billions of pounds. Ros Altmann is a pensions consultant who helped prepare the case sent to the Ombudsman. ALTMANN: The occupational pension schemes that we had were not like another private investment because the government endorsed them and the government continued to tell people they were safe. And, knowing that members thought that they were safe, they continued to tell them that they were safe when in fact they weren’t. And finally I think one of the biggest problems we have is that the Department for Work and Pensions and the Treasury decided to relax the rules for the government’s minimum funding standard that these schemes had to meet, which reduced members security even further, and still didn’t tell them. LEWIS: We heard Alan Marnes say that it was thirty years ago he was told that they were safe. Does this bad advice go back that far? ALTMANN: As far as I’m concerned the problem goes back to the 1995 pensions Act. When we had had the Maxwell situation and people were worried about the safety of their pensions. And what the government said was, at that time, we are now going to make pensions safe. They are going to be protected by the law. And they put in the minimum funding requirement so the government said don’t worry you can have confidence because we are putting in a safety net. LEWIS: And it was this minimum funding requirement that was introduced then and at the time and for many years after everyone, almost everyone, believed that if there was the minimum funding requirement that was enough to pay the pensions – but it’s not. ALTMANN: That’s really what a lot of this centres on. Everybody thought that if their scheme was a 100% funded that meant, as most people would think, any reasonable person would assume, that it had enough money in it to meet the liabilities. That wasn’t true and even thought it wasn’t true the government continued to weaken that funding standard. LEWIS: So there are those two points – the misleading literature and the minimum funding requirement not being enough. If the Ombudsman finds in favour on one or both of those points what will it mean to those 65,000 people who have been affected so far. ALTMANN: If the Ombudsman finds that the government’s handling of the occupational pensions system in the UK has been careless she then has the power to recommend to parliament that people should be put back in the position that they would have been if the maladministration hadn’t occurred. And also to recommend damages for the stress and distress and whatever other suffering that these people have been through as a consequence of what’s happened. LEWIS: Well also joining us from Manchester is Brian Gallagher he’s from the manufacturing union AMICUS. Brian do you see this parliamentary Ombudsman case as good news for your members who have been affected? GALLAGHER: Yes Paul. I think we welcome the enquiry. I’m a bit puzzled though because there is a legal case pending and I didn’t think that the Ombudsman would be allowed to have an enquiry pending a legal case. And it could throw up some problems in as much as ministers may not be able to go to the inquiry and give evidence on it because they could prejudice themselves in light of a legal case. Our union and the Community Union have taken a case out against the government on behalf of workers of Allied Steel and Wire – ASW – in respect of the Thatcher government at the time in 1980 failed to implement a directive under article 8 which would have had a provision that would have built in protection for members of occupational pension schemes. The Thatcher government failed to do it and subsequent government have failed to do it and we got a major boost on that legal action by the way last Tuesday when the High Court decided to refer the case to the European Courts. LEWIS: And you’re seriously saying that the Ombudsman case running sort of ahead of the court case could prejudice the court case? GALLAGHER: It would be difficult for ministers or MPs to go and give evidence to the Ombudsman or be questioned by the Ombudsman if they felt indeed that they may prejudice their case against the two trade unions that are taking the legal action. LEWIS: Ross Altmann is it correct? Is there a difficulty with running the Ombudsman case prior to the European Court case?. ALTMANN: I’m very disappointed to hear that line of argument to be honest Paul. Because the Parliamentary Ombudsman has extensively investigated what her powers are in the face of the legal case that is going on. She has taken legal advice in detail on all of this and what the legal case is about is about whether the law was adequate. That is the one thing that the Parliamentary Ombudsman cannot look at. All credit to AMICUS and Community for taking this case to the European Court. But why would that not be able to run along side another form of redress for these people? And in practice the Ombudsman case is going to be reporting within a period of months. A legal case will be a period of years, there are people in their 60s here who cannot wait that long. LEWIS: That is a good point isn’t it Brian. I mean that there is an urgency about this – people have had to sell their houses some people have died without having this resolved. By their nature these are older people and they don’t have the time to wait for a case to proceed right through the European Courts. GALLAGHER: Absolutely. I mean I am not arguing against the case you know. We welcome the fact that the Ombudsman is going to do an inquiry. I mean that if it does come out that way and they do decide that their backs are against the wall and that they will implement any of the findings if they go in our favour – then that’s great because I mean it may save us quite a bit of money in the legal case as well. LEWIS: And Ros Altmann finally if the Ombudsman finds in favour of people who have lost their pensions the government can ignore that recommendation but they can’t ignore a decision by the European Court? ALTMANN: In 37 years the government has only failed to follow the Ombudsman’s advice in two cases and they were both Freedom of Information issues. I cannot see any way in which Parliament would not follow the Parliamentary Ombudsman’s own advice. If it finds there is an injustice and recommends it must be remedied I can’t see how the government will not agree to compensate. LEWIS: Ros Altmann and Brian Gallagher thanks very much. Parents of every child born from September 1st 2002 will soon get a letter about the new Child Trust Fund. These parents will get at least £250 from the government which they must invest for their child, who will get the money at 18. The first letters went out this week. Louise Greenwood's here, Louise you've been looking at the detail... GREENWOOD: Yes the Inland Revenue has sent out 200,000 letters since Monday to parents of all children born from September the first 2002 and more are on the way. People are being identified through their child benefit record so shouldn’t need to do anything. One point five million letters in total should have gone out by Christmas. These are just advice letters but the cash voucher itself will follow in the New Year. Households on lower incomes will get more, a voucher for £500. Once you've got it the next step is to decide how to invest it. SOUND: “next customer please”…. GREENWOOD: And you could bring it to somewhere like this- I’m at a Sainsburys supermarket . This week Sainsburys announced that it will be offering its own Child Trust Fund account through stores just like this. The idea is that you bring the voucher here invest the £250 and you can add more to the account when you do your regular shop. Gail Quinn is Sainsburys Bank’s Head of Business Development. QUINN: Our relationship with consumers particularly families in terms of their visits to the supermarket and their feelings towards Sainsburys as a brand left us very well positioned to come into this market and so there is a great opportunity here for us to advertise to them while they’re in shopping buying nappies, buying food. GREENWOOD: So you can open a Child Trust Fund account in a supermarket, but strangely you may not be able to do so in your local building society. That's because the government has said that those offering CTF accounts can’t just provide a standard no-risk interest account invested in cash - they must also offer access to an alternative account that invests in shares. The return on the shares based account might be better - but that can’t be guaranteed. Brian Morris is Head of Savings Policy at the Building Societies Association... MORRIS: They feel that could expose some of the customers to equity risk which those customers are not used to dealing with and would not feel comfortable dealing with. Those customers value safe products where they know that their money cannot be eroded. Many of our members are local friendly mutuals locally based organisations who have strong links with their community. It is a pity that these institutions are not going to be in the market for the Child Trust Fund. GREENWOOD: But Britain’s biggest building society the Nationwide is to offer the CTF and this week began registering interested parents. Other names to offer the account are Barclays, Norwich Union, Fidelity, Liverpool Victoria, Scottish friendly. The Childrens Mutual, and Family Investments. Names will be on a list of approved providers included in a government information pack about the scheme, which goes out in January. The cash voucher will follow soon afterwards. So soon many more people should be familiar with the Child Trust Fund Account. But a report, also out this week, compiled by the Personal Finance Research Group on behalf of Barclays, has questioned how popular topping up the funds will prove to be. Elaine Kempson is the group’s Director KEMPSON: The middle class families that we talked to were already saving for the children who would qualify for the Child Trust Fund and they really doubted whether they would be likely to put money into another account. The poorer ones, however, who will be getting £500 instead of the basic £250, were much more positive although they doubted really whether they would be able to put money regularly into that account. But both groups of parents were really quite deterred by the fact that the money would be tied up until the child reached 18. LEWIS: Professor Elaine Kempson. So Louise what happens when the account has been set up? GREENWOOD: Well once the account is open family or friends can contribute up to £1,200 a year, so the pot could grow to quite a healthy sum by the time the child reaches eighteen. And don't forget the government has pledged to send out a second voucher when the child is seven, but we don’t know how much it'll be worth yet. LEWIS: Thanks Louise. And you can get more details about the Child Trust Fund through our website and the BBC helpline. Now we often complain on Money Box about the bad deals on offer from some of the High Street banks and there's one part of the United Kingdom where the deals are at their worst -Northern Ireland. It has its own 'big four' banks - Bank of Ireland, First Trust, Northern Bank and Ulster Bank, which have 80 per cent of the market between them. And the deals they offer are pretty terrible. The best branch savings account from the Northern Ireland banks pays just 1.2% interest on small amounts. A third of the rate you can get from High Street banks in Britain. It's even worse for overdrafts. Someone who goes overdrawn for two weeks a month for £500 could pay £236 a year in Northern Ireland compared with as little as £11 elsewhere. Well these figures come from research published this week and have aroused a strong reaction in Northern Ireland, as BBC Radio Ulster's Talkback programme found. MAN: These respected pillars of society are the modern day pick-pockets they can come and go at will with your money and there’s not a lot you can do about it. WOMAN: I’ve got so many gripes about my bank its not funny. I had been overdrawn by £1.37 as the result of that the bank charged me 3 months’ fees for any transactions that occurred. I thought it was absolutely ridiculous for £1.37 MAN: I duly lodged the £25,000 and after 3 years I got the marvellous sum - £97 interest. Oh my goodness. LEWIS: Listeners to Radio Ulster's Talkback this week. The research was done for the consumer organisation Which? because this week it submitted a super-complaint to the Office of Fair Trading about the lack of competition in retail banking in Northern Ireland. With me is Graham Vidler, Head of Policy at Which. Graham what is the basis of this complaint? VIDLER: Thanks Paul. Well it’s quite simply really. In Northern Ireland people are paying too much for just about every aspect of their banking relationships. They get next to no interest on their credit balances. If they go overdrawn for just one day they pay every time they want to access their money for the next three months. And its not just one or two banks which are treating customers in this way it’s all four of the big four Northern Irish banks. In short it is a market which isn’t working for consumers it’s working for the banks, and that’s why Which has asked the OFT to investigate. LEWIS: Yes well as we heard from that listener £97 on £25,000 over 3 years and that was a savings account I think and certainly our research found that branch based savings account is between 0.6 and 1.2% so it is pretty terrible. Listening to that in Belfast is Alan Walker, he’s Head of Consumer Affairs, at the General Consumer Council there and they supported Which? in the super-complaint. Alan, why are banks in Northern Ireland offering the kind of poor deals we have heard about?. WALKER: Well that’s a key question that we want answered and why we have been working with Which? on this super complaint. We believe it’s unacceptable that people here are getting a much worse deal than people elsewhere in the United Kingdom and really what we are saying is that the banks should take immediate steps and withdraw these transaction charges and deal with these issues so that the consumers can start to get a better deal because certainly when you looked at the evidence which Which? has produced, and indeed the evidence we’ve found ourselves, the simple fact of the matter is that the market doesn’t appear to be working for consumers. LEWIS: Yes I mean we spoke to the four banks none of them would be interviewed on Money Box. They did though deny that there was a lack of competition and Alan they stress that most of the customers enjoy free banking and we were also told that people in your area expect a large branch network and of course that costs money – doesn’t it? WALKER: Well it does cost money but the simple fact of the matter is like the rest of the UK, Northern Ireland has suffered with a reduction in branch numbers over the past year. You have many towns and villages now that don’t have a branch so the reduction that is happening elsewhere is happening in Northern Ireland and indeed while we may have a slightly higher branch network you know it is reducing as we speak and on a daily basis almost. So that in itself is not sort of a strong case as to why they should charge so much more indeed twenty one times more if you look at the examples that Which? have put forward and the simple fact of the matter is that if you look at the people who are going overdrawn they tend to people who can’t afford these additional charges. So they’re being punished twice. LEWIS: It’s a bit puzzling in a way though because Abbey, Alliance and Leicester do operate in Northern Ireland. They offer the same good deals they offer in the rest of the United Kingdom. Why don’t they pick up customers from the big four banks in your area? WALKER: Well obviously there is an issue of customer loyalty and indeed we’re working with Which? to produce a leaflet to challenge that loyalty. But the other side of the coin is that if you look at the big branches they tend to only be in perhaps Belfast City centre area and don’t have networks throughout Northern Ireland. So really people don’t have the access to the banks on the same scale so therefore they’re not making the switching at this point in time but we want to encourage that with Which? over the next few months. LEWIS: Ok ,and Graham Vidler from Which? what do you hope to come out of this OFT complaint?. VIDLER: We’ve got three targets. Firstly we have referred this to the OFT who have 90 days to report back to us. We hope that if they find evidence of anti-competitive behaviour they will refer this to the Competition Commission. Secondly we would like consumers in Northern Ireland to consider switching now. They can do that by using our website switchwithwhich.co.uk Thirdly and most importantly we would like to see the big banks treating their customers fairly, they can do that now if they really want to look after their customers. LEWIS: Ok we will see what happens Graham Vidler from Which? thanks and also Alan Walker from the General Consumer Council in Northern Ireland. Well it wasn't just fox hunting that caused problems this week between the Government and the House of Lords. Major reforms on pensions also went back and forth between the Commons and the Lords as peers tried to force the Government to make concessions on annuities. At the moment we have to use three quarters of our pension savings to buy an annuity - an income for life. There is some flexibility at pension age but at 75 you have to hand over your pension money and take an annuity. Well on Monday the Lords voted to scrap this rule. MPs then rejected those changes, and they also rejected further Lords votes later in the week to raise the age from 75. Oonagh Macdonald is Director of the Retirement Income Reform Campaign and was following this parliamentary ping pong. Oonagh another defeat for reform - the government is obviously firmly against it – Why do you think its so important to scrap this rule? MCDONALD: First of all another defeat for reform but strong support from the opposition parties and really no change because the Treasury was unwilling to negotiate at all. Why is this important? Because it gives people greater flexibility over the use of their retirement income funds and we think that for many that choice will be extremely important. The second point to note is that there is now more and more evidence that having to purchase an annuity in the way that you described is acting as a disincentive for younger people to save and has proved extremely unpopular with those in the relevant saving age groups forty plus. That is a very important feature because of course we have the move away from the final salary schemes to money purchase schemes increasingly as employers want such schemes. LEWIS: Well also with us is Stuart Bayliss s he runs Annuity Direct an independent financial advisor that sells annuities. Stuart shouldn’t people have more flexibility with their own money? BAYLISS : Yes and we will advise, where relevant, people not to buy an annuity when they first start retirement. But this has to be a real debate and the real debate is about the fact the scrapping of annuities at the moment would realistically effect less than 5% of people. The real debate is the fact that in comparison to 30 years ago retirement is lasting another 9 years. What we need are practical and real solutions to move the normal time of purchasing annuity to 70 because I spend a lot of time talking to 70 year olds plus and they want to make things certain in their lives. They want to buy annuities and those are the people who have exercised this option to go into draw down. They are wanting to buy annuities. LEWIS: So buy them later. But Oonagh you gasped when Stuart said it only affected 5% of the people. But of course the ministers in the House of Lords did say this as well didn’t they? Your reforms would not help many people. MCDONALD: I’m very sorry but I’m afraid the ministers in the House of Lords simply do not understand the implications of an annuity purchase or how the statistics are collected or the fact that for very many people the size of the fund they may have in a personal pension pot of some kind rests also on other pension provisions, SERPS, former occupational pension schemes and so on. So the size of the pot is actually a very misunderstood figure. Secondly in countries where there is a choice like Canada you can either put your money into an annuity or you can transfer it into a retirement income fund where it’s invested with perhaps more than one fund manager, you can change the fund manager and so on. Very many people exercise that choice. Now I’m quite happy if people age 70 or whatever want to buy an annuity. What we are opposed to is everybody at the age of 75 being forced to buy an annuity. LEWIS : Stuart BAYLISS : This fund choice is available inside annuities. You can choose to up and down your income, you can choose to change whether you have an impaired life annuity or not. You can choose to have a different fund manager. These choices are now available inside annuities and the government is not going to move and I don’t think any government will move until they can see how you can protect the 90 year olds that Oonagh’s own figures say would run out of money it they matched an annuity. LEWIS: Stuart Bayliss thanks and Oonagh MacDonald thanks. I suppose the next moment for people to look at this is in the general election as the government is clearly against it. The Pension Bill of course did go through bringing in many changes including the Pension Protection Fund and if you have views about annuities you can have your say on our web site. And Louise, another 'end of term' result in Parliament that will affect some people and their money... GREENWOOD: Yes the much-debated legislation that gives same-sex couples similar financial and legal rights to married couples passed its final hurdle. The Civil Partnership Bill should now come into effect next year. It’ll give same sex couples who register their partnerships similar rights and responsibilities to married couples in pensions and property and some other areas. It stops short of giving them the same rights as married couples for taxation purposes - though this is likely to come in a future budget. LEWIS: Thanks Louise. That's it for today. You can find out more from the BBC Action Line 0800 044 044. And of course our website bbc.co.uk/moneybox. Personal finance stories on Working Lunch weekday lunchtimes. Don't forget our phone-in, Money Box Live, on Monday afternoon. This week Vincent Duggleby takes your calls on renting and letting property. I'm back next weekend with Money Box. Today, the producer was Chris A'Court, the reporter Louise Greenwood and I'm Paul Lewis.