New Petitions

I first became aware that there was a considerable surplus in our Scottish Bus Group pension funds in 1993. I read in the daily press that, during the National Audit Office inquiry into the sale of the SBG, the sale of the companies in the group had realised £40 million and the Government stood to benefit by a further £150 million, which was the surplus in the pension funds at the time. I took up the matter with the trustees of the fund, but was unable to make any progress. In 1998, I learned that the pensioners of the National Bus Company in England had succeeded in having £356 million of the surplus in their pension funds returned to them. The Government had wrongly taken that sum from them when the funds were wound up. With the assistance of the people accompanying me today, we formed a committee and began a campaign to achieve parity with our colleagues south of the border. We felt that the situation regarding the surplus in our funds was similar to that faced by the NBC membership. Then we enlisted the help of MSPs, who have greatly helped and supported our campaign. The Office of the Pensions Advisory Service—OPAS—has also been active on our behalf.In December 2000, the Executive made an offer of £100 million in ex gratia payments. However, at a meeting of the Finance Committee on 26 June 2001, it was revealed that the surplus figure at April 2000 was £250 million. In view of that revelation, the £100 million that was offered was grossly inadequate. In November 2001, another £18 million was offered, made up of a reduction in the pensions surplus tax from 40 per cent to 35 per cent and a proportion of a year's interest on the surplus funds. At present, the surplus stands at more than £268 million; after taxation, the surplus will be £174 million. The pensioners maintain that that is the figure that should be on offer, not £118 million. In addition, no tax should be levied on the ex gratia payments, but the Inland Revenue seems to seek to tax them. If it does so, the £118 million will be worth less than £100 million. Thus, only a third of the gross surplus of more than £268 million would be available compared with the two thirds that were settled tax free in the case of the National Bus Company. In mid-December 2000, when the offer of £100 million was made, newspapers predicted that payments would be made in time for Christmas. The Minister for Transport later suggested that payments would be made in autumn 2001. When the offer was increased in November 2001, the timetable was revised to April 2002. It is now May 2002, but the end is still not in sight. The majority of the pensioners are elderly and time is not on their side. The petitioners call on the Scottish Parliament to urge the Executive to increase the amount on offer and to expedite payments, so that the pensioners are able to receive the maximum benefit—tax free—from the pension surplus at the earliest possible date.

Those involved in the equivalent scheme in England began to receive interim payments from 1 August 2000. In August 2000, they received an increase in payments of 4 per cent. They also received a lump sum payment based on the date of commencement of their pension. In one case, a lump sum payment of £1,680 was made, without tax being subtracted. On 1 April 2001, the beneficiaries of the NBC scheme received a 9 per cent increase in pension payments, which was then multiplied by 15. The gross lump sum payment that one man received on 1 April 2001 was £4,215. That sum was not taxed.In February 2002, those involved in the scheme were supposed to receive all the money that they were owed. We have a letter detailing the payments that one man received from Standard Life in Edinburgh. On 1 February 2002, he received £10,600. The letter states clearly that no tax was paid personally on that sum. The English paid tax on the lump sum, at a rate of 40 per cent. Forty per cent was paid in tax and 1 per cent was paid to those who administered the fund. We have been offered 43 per cent of the surplus in the fund, but we need around 65 per cent to get anywhere near the amounts that have been paid in England.Sarah Boyack, when she was Minister for Transport and Planning, and Lewis Macdonald talked about the need for parity with the English system. More than once it has been stated in Parliament that we will get that. However, we will not get that until we get 65 per cent of the surplus. I can provide members with the details of that in writing.

Yes.

It is likely to be £8,000.

We were told that the average figure would be £8,000. Dennis Canavan raised the issue of audited accounts and we asked for details of those accounts. That allowed Derek Scott to go through the accounts on our behalf and tell us what the figures amounted to. We are not mathematicians. We cannot tell the committee how much we should get. We know that we paid into the fund for five years longer than our English colleagues did. We also know that we had better fund managers. That means that we had a healthier fund per man at the end of our time than people in England did.

I will go back to the talks that were held when the pension scheme was set up. At that time, a lot of changes were taking place in the Scottish Bus Group, including the change from double-crewed to single-operated buses, which was done to get rid of conductors. Because of that, many carrots were dangled in front of the trade unionists, drivers and everyone else. One of the carrots was the introduction of a pension fund.In 1973, we were talking about a deferred pay increase, which we now hope to collect to enhance our quality of life in our retirement. That is not happening.

No. We simply went along with the negotiations that took place between the trade unions and management. The pension fund was set up in 1974, following the elimination of platform staff from the bus industry. At that time, carrots, including increased payments, bonuses and the pension fund, were dangled here, there and everywhere.

We have not got as far as that.

In my case, that is not correct. Several of us went to OPAS. We were advised that things were happening, as the trustees were supposedly winding up the Scottish Bus Group fund. In my case, the ombudsman was not asked to take the case further.The OPAS adviser suggested that I leave the matter, because the funds were being wound up and a settlement should be made fairly shortly. I imagined that it was possible to go back to OPAS.

Perhaps someone else went to the ombudsman.

Early last year, I wrote to the pensions ombudsman about my case. He replied, saying that he could take no action because Scottish Bus Group had not decided what it was going to do with the money. He said that, if we contacted him again once a final decision had been taken, he could investigate the matter.

I suspect that that is the minister's view. I also suspect that it has come from civil servants and the trustees of the Scottish Bus Group pension scheme. If we go back a little, the trustees of the National Bus Company did wrong. They were taken to court, the process took six years and the final decision was taken in 2001. As my colleague said, interim payments started in 2000; the company did not wait for the court to rule on what was a wrong act by the trustees. We have always been told that the Scottish Bus Group trustees did no wrong. The basis for that is the green book that Alex Anderson has in front of him, which is the UK National Audit Office report of 1993. There is one page in that book about pensions—it is written by accountants—but I do not think that it is a justification, when we consider what happened with the National Bus Company scheme.Lawyers were involved with the National Bus Company scheme and actuaries were asked to calculate what the fund should have been, because the money had gone back to HM Treasury after privatisation. They came up with a figure of £605 million. Forty per cent tax was paid on that and the rest of it went to the members in what were essentially tax-free payments. That has been done for pensioners, as Chic Hulston described. In the case of those who are still working—who are known as deferred pensioners—Standard Life is writing to them as we speak to offer those who are over 50 tax-free lump sums. That is how the fund has been dealt with south of the border.The Scottish Bus Group pensioners did not go to the ombudsman because they took the advice of OPAS and contacted the trustees for clarification. The OPAS adviser described the moves of the trustees as a body swerve—they have been evasive. The pensioners have reserved legal action until they have an offer that they can consider. At the moment, they do not know whether tax is payable, when it might be payable or what the offer is. The pensioners commissioned a legal opinion, copies of which have been sent to the Chancellor of the Exchequer, the Scottish Executive and many others, which shows, contrary to the view that the trustees did no wrong, that there are grounds for legal action.There has not been legal action because the threat coming back from the minister is that, if the pensioners action committee takes legal action, the settlement process will be put on hold. As we heard, the English case took six years and, as Mr Anderson said, the pensioners are not getting any younger. Pensioners attend funerals fairly regularly, which means that the number of pensioners who are eligible for some of the pension surplus is diminishing all the time. I hope that that corrects what the minister said about the position. Until an offer is on the table, we will reserve the option of going to the ombudsman.

We have no problem with that. We have given the legal opinion to the chancellor and others and we are happy to provide the committee with a copy.

Yes.

The pensioners have not yet commenced action through the ombudsman.

Although the National Bus Company scheme was wound up and the surplus went back to HM Treasury, the effect of the court decision was to reconstitute the fund as a tax-exempt approved pension scheme and to enable the trustees to pay the money to Standard Life, which stands in the same relationship to the National Bus Company scheme as Royal & SunAlliance does to the Scottish Bus Group scheme. Standard Life distributes the tax-free increases in pensions and, for the people who do not draw a pension but who have reached 50, it offers them a tax-free lump sum. That is what is happening in England.In Scotland, a completely different route was taken. As Dennis Canavan said, the trustees wound up the pension scheme, which meant that the surpluses went back to the principal employer—that is where the 35 per cent taxation was paid. The proposal is to pay out part of the surplus of £174 million that remains with the principal employer—£118 million is the latest offer—as ex gratia payments. I am an accountant and a pension trustee. When I heard the words "ex gratia" I thought that the trustees and their advisers were trying to ensure parity with the English offer. In most circumstances, ex gratia payments are not contractual or taxable.However, this is where we seem to be getting into difficulty, because the Inland Revenue's position hinges on two factors. It accepts that typical ex gratia redundancy payments are not taxable as long as they do not exceed £30,000 and there was no contractual expectation that they would be made. Apart from one or two well-off former executives of the Scottish Bus Group, none of the pensioners is looking at a £30,000 pension bonus. The average is £8,000. On that basis, an ex gratia payment should be a tax-efficient method of making the payments.However, the Inland Revenue sees such payments as coming from an employer to people who are members of the employer's pension scheme and therefore does not accept that the ex gratia tax relief is available. Moreover, it does not accept that such payments are part of a redundancy plan. The situation becomes more complicated with beneficiaries who might be entitled to a share of the surplus. Although they did not work for Scottish Bus Group, they are entitled to payments through membership of the payment schemes; however, that leaves it open for the Inland Revenue to tax them.We all know that the Inland Revenue makes concessions—it has done so with war widows, for example. Such concessions can be negotiated with the Inland Revenue where payments are made without tax. However, we are not aware that any such moves have been made. When pensioners write for clarification to the Inland Revenue, it simply responds that payments will be taxable.

Clearly we do not feel that. The parity arguments have been advanced in terms of the quantum of the original offer, which was £100 million on the assumption that there were 14,000 Scottish Bus Group pension members or beneficiaries. That makes an average of £7,000 a member. As far as the English case is concerned, we are talking about £605 million of gross surplus—or £356 million after the surplus was paid—and 54,000 beneficiaries, which gives an average of £7,000 in round thousands. That is where the £7,000 figure comes from.Fergus Ewing is right. The English bus companies were privatised between 1986 and 1987, whereas the Scottish companies were privatised in 1990 and 1991. The buy-out of the English liabilities to Standard Life took place in 1989, whereas the buy-out of the Scottish liabilities to Royal & SunAlliance took place in 1993. As the pension schemes were essentially set up at the same time in the early 1970s, one would assume that the Scottish Bus Group would have earned a slightly higher per capita value because of the later privatisation. The period between 1987 and 1993 was probably a good period in which to invest in pension schemes. One could argue that the English schemes came out early and that the Scottish schemes would have had the benefit of longer and generally good returns.However, that raises the issue of the trustees' lack of transparency and disclosure to the pensioners. In correspondence—I do not think that it was mentioned in Parliament—the minister suggested that the pensioners received £33 million of surplus in 1993 through enhanced values at that time. He also said that that figure represented a significant part of the £105 million surplus in 1993, which implies that, after the £33 million was credited to pensioners, only £72 million was left for the trustees to carry forward. If that is the case, I do not know how the trustees have reached the figure of £268 million this year, because one cannot reconcile such investment growth with the investment returns in those years. However, in evidence given at Westminster in December 1993, Peter Mackay of the Scottish Office industry department said that the surplus after any allocation to pensions at that time was more like £150 million. If one takes £150 million from 1993 and invests it sensibly—as trustees should—it would reach £268 million today.There has been a lot of body swerving, misleading information and a general failure to inform pensioners what they had a share of at the time. They have been offered a last-minute concession, but taxation issues have not been dealt with and there is no consideration of giving parity in terms of the proportion of the total fund. I am sorry, but the offer is not adequate.

I accept the point. I do not want to go into too much detail on pensions—I can become a bit of a pensions bore. Many of the workers who continued with the privatised company of the NBC were offered lesser pension schemes after privatisation—so-called money purchase pension schemes in which the contributions were lower. Therefore, I would not want to make too strong a argument about parity in relation to what happened to a typical English or Welsh bus worker in those years. The new employer might not have given them the same level of pension scheme as was enjoyed by the Scottish Bus Group drivers in those years.

It came about because privatisation in Scotland was later—in England privatisation took place in 1986 to 1987 and in Scotland it took place in 1991. Employees continued to work in Scotland in the interim and continued to pay pension contributions. I should point out that at the time the employer was taking pension holidays—it was not even a case of the employer standing alongside the members and putting in extra contributions. One of the first pieces of information that companies that bought parts of the privatised Scottish Bus Group received was that the pensions holiday was coming to an end and that, if they wished to stay in the Scottish Bus Group pension scheme for an interim measure, they would have to pay a high contribution rate. That was an incentive to those companies to set up successor private sector pension schemes and that is what they did. However, the record of employer contributions in the gap years is not a case of matching or putting in slightly more than the members put in—the employer took pensions holidays during that period.

The court process rumbled on until the end of October 2001 but, as Mr Hulston said, the first interim payments were made in August 2000. That was done through Standard Life in Edinburgh, using the exemptions of a tax-approved pension scheme.

The Inland Revenue limits the tax-free lump sum that one can get from a pension scheme. It would appear that few, if any, of the National Bus Company members are at the Inland Revenue limits. That has been approached properly.One of my initial concerns about the National Bus Company settlement was the amount that was being spent on professional fees, which ran to many millions. However, I now think that that money was used wisely, because a solution has been arrived at that ensures that the money can be paid as soon as possible to pensioners who have the greatest need, using the tax exemptions of an approved pensions scheme.

It was the decision of the 27 directors. No one else could stop them. That was one of the points that Dennis Canavan raised in Parliament. They gave themselves £27,000 each for the loss of their BUPA—British United Provident Association—agreement. We should bear in mind the fact that there is no evidence about how the vote was taken or who voted for the award. They gave themselves the money because they were the trustees and the ex-directors and ex-managers of the company. The same men, incidentally, are back knocking at our doors looking for more money because they were the highest contributors to the staff pension fund.

Mr Hulston is right. I will not name anyone, but I will point out that the trustees of the SBG pension schemes are also the directors of the SBG.

The Scottish Bus Group was owned by the Scottish Transport Group and, ultimately, the Secretary of State for Scotland, so there would have been a form of public accountability at some point. However, I am sure that the idea of awarding compensation for loss of benefits was arrived at not by the employer but by themselves.

The substantial document that I have with me is a file of information bulletins that have been sent out over a period of years by what is known to be the best pension fund. It explains how the scheme was wound up and so on. The rather less substantial document that I have with me is the one that we were given when we met Scottish Executive officials at Victoria Quay on 17 December. The first statement that the official made at that meeting was that he had been to London and had got us a further £18 million. I put my hand up and asked to make a statement on the factual content of his statement. I then told him that he was telling porky pies and that that £18 million came from the reduction in the tax on the pension fund, which amounted to £13 million, combined with a further £5 million, which came from the interest that had accrued. The official said, "Well, maybe you're right," but he did not give us one piece of information. If you could check the minutes of that meeting, you would find that he left the hall a wiser man than he came in. He did not know a thing about our pension fund and was just talking crap.

No, it was a civil servant—it was Kenneth Crawford.

Four civil servants were at the meeting, but none of them knew anything about the pension fund. They told us that we would get £8,000 and that we should go away and be good boys and stop annoying members of Parliament and everybody else. That was the size of it.

We can provide the committee with the names. The lack of knowledge of the taxation issue extends further back. The Finance Committee debated the matter in June 2001. The chancellor had reduced the tax rate on pension surpluses the previous month—that measure was contained in the Finance Act 2001. In meetings of the Scottish Parliament's Finance Committee in June 2001, however, there was still talk of a 40 per cent tax on pension surpluses in spite of the fact that a Scottish chancellor had reduced the rate to 35 per cent. I am sorry, but we do not have confidence that the civil servants with whom we are dealing understand the taxation and pensions implications of what they are offering.

We could certainly do that.

Since we started our campaign, the figure of 14,000 pensioners has been bandied about, but that number comes from the Scottish Bus Group trustees' October 1993 figures and so are nine years old. Those are the trustees' most recent figures, because affairs were handed over to the Royal & SunAlliance. I am sure that the number of pensioners is no longer 14,000, because some of them will have died off in the intervening years. I hope that the people who make up the payments take cognisance of the fact that fewer than 12,000 pensioners might now be entitled to receive them.Thank you very much for hearing our petition.

I doubt that any minutes were taken at that meeting. Indeed, it was mentioned at the meeting that no minutes were being taken. Someone might have drafted a form of minute later but, during the meeting, I was not aware of minutes being taken.

The Executive has been involved in meeting the trade unions. I understand the logic of what you are saying, but you will appreciate that most pensioners are no longer members of trade unions and so do not have the link to the trade union that they had when they were employed by the Scottish Bus Group. There has been a lot of emphasis on meetings with trade unions but not on meetings with the pensioners.