Debate raises pensions puzzle
Edinburgh North & Leith MP Mark Lazarowicz MP led a debate in Parliament today to call for pensions justice for bmi staff.
A number of bmi staff – some of whom are Edinburgh-based – saw their pensions significantly reduced after takeovers first by Lufthansa, then by IAG, the group that includes British Airways.
Lufthansa is paying compensation to members of the bmi pension fund but it is to be subject to tax and National Insurance by HMRC. One constituent lost out substantially because of this and contacted the North & Leith MP: their discussion resulted in today’s Westminster debate.
Speaking after the debate, Mr Lazarowicz said: Longstanding staff, some of them based here in Edinburgh, have seen their pensions cut significantly and are now losing out again as the compensation is taxed by HMRC.
“The Government has said it has no choice but to apply the tax rules but it is the Government itself and Parliament that decide what the tax rules are.
“This is a matter of justice and has much wider implications for pensions: if a perfectly solvent company takes over another solvent company with pension liabilities, how is it possible for both companies to be freed of responsibility for those pension liabilities?
“The Government should act to allow bmi staff to receive the compensation in full – employee pensions built up over years should not be wiped away amidst commercial wheeling and dealing.”
When bmi was sold to Lufthansa in 2009 there was no obligation on it to fund the pension scheme although it was prepared to continue to do so to a limited degree. When Lufthansa then sold bmi to IAG in 2012, the pension fund was excluded from the deal.
At that point it entered the public Pension Protection Fund which does not pay all of the pension entitlement built up where staff have not yet reached retirement and some staff have lost as much as 50% of their entitlement even after the Lufthansa compensation.
In the case of Equitable Life, the Government decided to pay compensation tax-free to those members who lost out and in another taxation issue, improvements to listed buildings, it set up a fund to compensate for the imposition of VAT.
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I would like to thank all those who gave me their support in the general election held on 7 May. I was proud of the way we took our message to every street in every part of Edinburgh North & Leith, and although we were unsuccessful, I am sure that the efforts of our team were one of the reasons why I received more votes in 2015 than in the 2010 election.
