Ofgem are right to close a pensions scam

The outcry from unions that Ofgem are undermining DB plans has to be put in context.

The issue is really about who is responsible for sorting out the mess that the Network Operators (eg the energy suppliers) have got into with their pension schemes.

Under the current regime, the cost of operating and funding the DB plans of the Network Operators – like Electricite de France has been passed on to the distributors- companies like Centrica (British Gas)

Ofgem’s concern “has been that our existing approach may not adequately place the same incentives on NWOs that are faced by other regulated and unregulated private sector companies to manage pension costs”.

Too right! The NWOs have been getting a “free ride” at the expense of the distributors and the distributors have been the fall guys- either absorbing the pension costs of their suppliers or getting beaten up for passing these costs on to us customers.

The NWOs have had no incentive to keep their costs on and to this day run pension schemes that would otherwise beyond their means- knowing full well that they can pass on their costs and hide behind the distributors.

In a way this an even bigger scam than the Local Govenment Pension Scheme. At least with the LGPS we know what proportion of our council tax bills go to paying council workers pensions. Do we have any idea of the proportion of our gas bills which is being used to fund the pensions of the NWOs?

Ofgem are absolutely right to stop this nonsense. Commercial organisations need to be accountable for their own staff costs and not be allowed to pass them through to distributors and consumers in this manner.

The unions need to be reminded that the cost of energy increases falls hardest on the poorest members of society and in defending the “legal right” of a group of companies not to manage their pension costs, they are condemning the poorest in society to greater hardship.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Ofgem are right to close a pensions scam

  1. Nick Reeve says:

    Not sure I agree with this. The argument that “Do we have any idea of the proportion of our gas bills which is being used to fund the pensions of the NWOs?” doesn’t really work. How much of my Tesco shopping bill goes towards the company pension scheme? How much of the money I pay for petrol goes towards the BP or Shell scheme?

    We need to get out of this idea that we only pay for the product we use. We don’t – there are dozens of other business costs that need to be met. Income from product sales is the way the company pays its workers, maintains its buildings and equipment, makes its product and funds its pension scheme.

    Do you think we should stop paying these bills because the money goes towards pay cheques? After all, money from these goes towards DC schemes?

    It is not a fault if a company wants to give its employees a decent pension scheme. It is up to the company to make a decision as to whether it can fund it and to make changes if it cannot. We need a more reasoned approach to the DB issue and not just a flat refusal to pay because it just makes us all sound jealous.

    • henry tapper says:

      Hey Nick!

      Thanks for your comment. the points you make are valid and I agree that we should not be jealous just because we lost or never had a DB promise.

      That said, I hate to see ineffecienceis, whether DB, DC or of any other kind that are created by weak or bad governance.

      Ofgem don’t seem to me to be undermining DB, they are just adressing the question of “who pays”. At the moment that question is unclear!

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