I should put some context to the comment below, made by Derek Scott after he had read my article about putting the £15bn surplus in the PPF to work.

There seem two types of surplus in UK DB pensions, those that have been created by high bond yields (please read here for more) and surpluses that have been created by real investment. It comes as no surprise to me that Derek Scott is behind two  “real surpluses”, one the Stagecoach Group Pension and another the Mineworker’s.

Those who know Derek, those lucky enough to have worked with him, others (me included) who have been taught by him since he’s retired, will understand his genius and the value he has brought. Like Con Keating and Andy Young, he is of a generation that made UK pensions what Frank Field called, “Britain’s economic miracle”.

Our invested pensions created surpluses from growth and not ephemeral yields from our inflated debt.

Below is a comment on my exasperation that we can have such wealth in our DB pensions, especially the PPF but such hardship among those who are pensioners. Andy Young reminds me that those most hard up in later years get pension credit, more can be done with that too but Derek’s comments are pension funds and how they can be managed properly by Government.

Below is Derek’s comment to my blog on pension surpluses, the picture is from the Government.

The money added to members’ benefits (£1.5 billion from the Mineworkers’ Pension Scheme and £2.3 billion from the British Coal Staff Superannuation Scheme) came directly from investment reserve funds and surplus cash generated by the pension funds’ own assets since 1994, not from a “gift of taxpayers’ money”…….

In the 30 years since privatisation, HM Government has received approximately £7.9 billion from the schemes’ surpluses without needing to contribute taxpayer money.

I have to declare an interest, having served for four years between 2004 and 2008 as the last UK government appointment to the mineworkers’ scheme made by the then Department of Trade and Industry. Responsibility for subsequent appointments passed to the trustee board.

UK government did not expect or forecast a specific value as high as nearly £7.9 billion when establishing the 50:50 surplus-sharing arrangement during the 1994 privatisation of British Coal.

Parliamentary reports and select committee findings have noted that the 1994 arrangements and the 50:50 split were set up arbitrarily without detailed long-term actuarial forecasting or due diligence on how large the surpluses might eventually grow.

For further background

commonslibrary.parliament.uk/research-briefings/sn01189/

The surpluses ultimately surpassed initial expectations because the schemes’ investments performed much better than anticipated over the following three decades. No UK Government contributions have been required since privatisation.

The schemes’ actuary continues to be the Government Actuary’s Department.

Remember we are talking about schemes which were closed in 1994, which means they operate for existing pensioners and deferred members at that time. The survivors and their dependants are not getting any younger.

I would suggest in agreeing to waive the remainder of any mineworkers’ scheme surplus-sharing, which was due to end in 2029 as a backstop anyway, UK government has acted as an exemplar among sponsors of occupational pensions.

Private sector employers such as BP, Goldman Sachs, Hewlett Packard, Nissan, Shell, and others, have been criticised for capping annual increases or withholding discretionary adjustments.