The government's decision to extend the Financial Assistance Scheme for workers who lost their pensions when their employers collapsed, is just more political spin, says a leading pensions campaigner.
At the moment the FAS rules currently restrict financial help to pension scheme members who were within 15 years of retirement at 14 May 2004 when their scheme collapsed.
In addition it provides less than 80% of their lost pensions to those who were more than seven years from retirement at that date, and a ‘de minimis’ rule excludes those who would receive £10 a week or less from the FAS.
But Dr Ros Altmann, an independent consultant and former government adviser on pensions, says the announcement to remove the ‘de minimis’ rule and increase funding from £2bn to £8bn, which the government says will provide all 125,000 workers affected with at least 80% of their accrued rights, is “just more spin, and is not what it seems”.
She says: “How long will the Chancellor insist on playing games with this issue and leaving people who saved all their lives in destitution for years. Extending the FAS is not the answer and anyway the fact is that the Treasury has not put a penny into it.”
Altmann points out the FAS has so far only paid out £3m since its establishment in September 2005, with the FAS statistics showing 1,000 people are currently receiving payments, and yet she argues there are 10,000 people without their pensions today and more coming up to retirement each week.
“The scandal goes on I'm afraid and we need to keep up the pressure on the government to do the right thing and pay at least Pension Protection Fund (PPF) level benefits to all those who have lost out,” says Altmann.
Nigel Waterson MP, Conservative Shadow Minister for Pensions, says this is "more 'smoke and mirrors' from the Great Illusionist", as the move will extend the FAS to those who are still many years from retirement but will do nothing to help those on modest pensions who have already reached retirement and are trapped in the FAS process, receiving no help at all.
He adds: "It mystifies me why this government cannot see the damage they are doing to confidence in the entire pensions system by their mean-minded and grudging approach to this issue."
"The FAS needs to be scrapped and its role taken over by the PPF. A halt needs to be called to the purchase of annuities by the FAS, and better use needs to be made of the remaining assets in the schemes affected," says Waterson.
"As the Official Opposition we have called on the government to meet with us to hammer out a just and lasting settlement which will ensure speedy and decent compensation for the people affected, and put an end to this painful saga."
Meanwhile Rachel Vahey, head of pensions development at Aegon Scottish Equitable, says while the extra funding is very welcome it won’t provide total compensation for the estimated 125,000 people who lost their pensions.
Although she adds: “But neither does the PPF provide full protection for lost pension benefits. As a result some may see it as a pre-emptive strike by the government in light of recent High Court challenges.”
However Lane, Clark & Peacock, a firm of consulting actuaries, says the announcement of the further extension to the FAS should be welcomed by all those who campaigned for pensions justice.
It points out: “Their campaign was always going to be won or lost at the political level rather than by what has happened in the Courts, on which there has been much partisan commentary.”
However it admits it is still unclear how a scheme which has “run up large administrative costs and has been so disappointing in its ability to actually make payments will be able to cope with a quadrupling in its size”.
LCP says if, as some suggest, an earmarked section of the PPF is to be used, defined benefit (DB) scheme sponsors will want “cast-iron assurances that there will be no leakage”.
Meanwhile consulting firm Watson Wyatt, says the government’s additional decision to investigate how the assets within affected schemes could help affected pensioners, might mean it is considering removing the requirement that affected schemes must wind up and buy annuities.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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