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Bankers’ Pensions (Limits)

Volume 489: debated on Tuesday 10 March 2009

Motion for leave to introduce a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to make provision for the pensions of board members of banks that are wholly or partly in public ownership to be limited in certain circumstances; and for connected purposes.

My Bill is born of public anger; there is hardly a household in the land in which anger has not been expressed, and outrage has not been felt, over the greed, selfishness and professional incompetence of a handful of Britain’s most prominent bankers. They, through a combination of overconfidence and professional arrogance, have completely undermined the reputation of, and public confidence in, the British banking industry.

Listening to these people’s mealy-mouthed apologies to the Treasury Committee some weeks ago, I just felt how totally detached they are from the world outside and from the daily experiences in the lives of people in my constituency. There is a total disconnect, and they seem to preside over a world wherein they are accountable to nobody. Their remuneration, pensions, and perks appear to be determined by a small tightly knit group of the privileged, who divvy out the cash like robbers stacking up the notes for the great share-out following a bank heist. Their ruthless decision taking has gone unchallenged for far too long. Since the big bang, successive Governments have progressively trusted them to operate within conditions of carefully manicured deregulation. They have exploited the opportunities that have been offered in a cavalier manner, and are now drawing us back into a period of greater regulation. They have only themselves to blame.

There has been almost a conspiracy of silence from the beneficiaries of those people’s largesse. In particular, institutional investors have rigidly remained silent, for fear of upsetting the dividend streams that have inflated the funds under their management; they themselves have feasted on a culture of fat bonuses and inflated commissions. At some stage it was all bound to come to an end, and now that we have reached that point, we must build on sturdier foundations.

My right hon. Friend the Prime Minister has rightly said that the conduct of those bankers has been “unjustifiable and unacceptable”. If only the international community had responded more positively to his calls, made nearly 10 years ago, for greater international co-operation and supervision, things might have been different. The international banking community knew that no nation state could act in isolation, and step out of line by imposing tighter regulation, without undermining the credibility of its own national institutions. We have become the prisoners of international inaction, while greedy bankers at home have known the truth and have been able to gorge on it—they have dishonoured their profession.

Britain had once been the envy of the world for the success of its banking institutions. We had led the world in innovation with our banking products, investment management services, transfers and competition generally. Now the spivs have moved in to destroy a carefully constructed reputation. My Bill should make them sit up and think twice before they come running to the state for a bail-out at massive cost to the taxpayer; if they want our help they will have to pay for it, and we know that they will not like that.

My Bill would amend section 91 of the Pensions Act 1995, subsection (2) of which deals with the inalienability of occupational pensions and states:

“Where by virtue of this section a person’s entitlement, or accrued right, to a pension under an occupational pension scheme cannot, apart from subsection (5), be assigned, no order can be made by any court the effect of which would be that he would be restrained from receiving that pension.”

Subsection (5) allows the amendment of an entitlement in certain conditions, such as when there has been a

“criminal, negligent or fraudulent act or omission”.

Those conditions do not appear to arise in the Fred Goodwin case, although the issue of negligence is still to be decided on, following the inquiry being undertaken by United Kingdom Financial Investments Ltd. It would, however, be possible to amend subsection (5) to include the acquisition by the state of a majority of the share capital in the company when the company was deemed incapable of trading as solvent, and was faced with administration arising out of the actions of individual directors. That is the substance of my Bill.

We know from events over the past week or so that the Government are being advised that forfeiture or even amendment of the Fred Goodwin pension entitlement is problematic. We now learn in the press that an attempt might be made to sue two senior executives for negligence in the exercise of their discretion over the payment. Again, we are in unknown territory.

The pension situation for employees of RBS is very different from the one enjoyed by Mr. Goodwin. Since 2003, new employees of RBS have not been able to retire early on a pension until the age of 55. Mr. Goodwin, aged 50, closed the final salary pension scheme—the one from which he is benefiting—to new entrants. Next year no employee, irrespective of their start date, will be able to draw their occupational pension before the age of 55. Employees over the age of 50 who resign, and who might be eligible for a pension at the age of 50, can claim the pension, but it is reduced by up to 40 per cent. for early payment. For RBS employees and pensioners who were employed by the company before 2001, the company also applies a pension clawback when they reach state retirement age. Irrespective of whether they qualify for a state pension, RBS claws back up to 30 per cent. of the value of a basic state pension from their company pension. That is having a disproportionate and detrimental effect on older pensioners, especially women part-timers.

My Bill does not deal with the Goodwin case, as it is not retrospective. However, it at least deals with conditions that might arise in the future if further banks need bailing out. As my right hon. and learned Friend the Leader of the House of Commons said in a recent BBC interview, the Goodwin settlement is not a pension,

“It is a severance payment.”

I say that it is a severance payment dressed up as a pension, and we want our money back. That is a message that the greedy and grasping Mr. Goodwin should take on board. We recognise that his pension pot, part of which was presumably transferred in, is small in comparison with the total of toxic liabilities that remain the responsibility of RBS.

Other banks, too, might wish to keep that message in mind. I am thinking of Lloyds Banking Group, which has just this week received further protection for further billions, made necessary by its takeover of HBOS. Lloyds has always been a first-class bank. Indeed, in October it ran an advert that read, “We’ve been rated Britain’s safest and most trusted bank. You could say we’re a bank you can bank on.” Within months of that advert, Lloyds, acting in the public interest to avoid HBOS’s collapse, had taken over the bank only to find that HBOS had failed to reveal the toxic nature of its liabilities, bringing Lloyds, a good bank, to its knees. When Eric Daniels and Victor Blank considered the bonus and £6 million pension pot of Peter Cummings, the former head of corporate lending at HBOS, did they really think that he deserved it?

My Bill would not sort out excessive pensions paid in banks that have been able to avoid taxpayer support and guarantees; neither is it retrospective. It is a Bill for the future. In the meantime, the country asks that those who mismanaged banks, destroyed savings, undermined share prices, depressed pension funds, threatened the existence of charities and the security of millions in retirement, and put tens of thousands on the dole should give some of their ill-gotten pension money back.

I commend the Bill to the House.

Question put and agreed to.


That Ann Clwyd, Rosemary McKenna, John Battle, Mr. Michael Clapham, Mr. Peter Kilfoyle, Mike Gapes, Mrs. Anne McGuire, David Taylor, Andrew Mackinlay and Mr. Dennis Skinner present the Bill.

Ann Clwyd accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 3 July and to be printed (Bill 73).