Pension campaigners have pointed out the extra money earmarked for the Financial Assistance Scheme in the Budget will only increase the total of the fund to £1.9bn, not the £8bn stated by Gordon Brown.
The Department for Work and Pensions (DWP) has confirmed the decision to increase the money available in the FAS fund from £2.3bn to £8bn is the cost in cash terms over the next 60 years, which means on a net present value basis the FAS has gone from £830m to £1.9bn.
But Dr Ros Altmann, an independent consultant and former government adviser on pensions, says: “As tax is payable on the FAS and people getting FAS will not get means-tested benefits, the net cost is even lower - probably closer to £1.2bn over 60 years!”
John Hutton, Secretary of State for Work and Pensions, says the extension of the FAS will be a “big boost” for people who have lost their occupational pensions as a result of their employer's insolvency.
He says: "We have listened to the arguments of campaigners, and we have complied with the order in the recent High Court judgment that we reconsider the Ombudsman's recommendation that we compensate affected scheme members.
"As a result, we will greatly extend the scheme from helping 45,000 people now to helping all 125,000 people who lost out when their schemes wound up under-funded between January 1997 and April 2005. This will increase funding for the scheme from £2.3bn to £8bn in cash terms.”
However, Altmann says Hutton seems to have misunderstood the ruling, as the changes announced in the Budget do not reflect the fact the government is responsible for what has happened, as this is still just an assistance scheme, rather than the pension restoration which is needed.
She adds: “In fact, the latest measures do not benefit any of the claimants in the Judicial Review, nor any of the representative complainants from the Parliamentary Ombudsman’s report.”
And Altmann points out while the changes to the FAS are of course welcome, almost all the people struggling without their pensions for the past few years are no better off today than they were when the High Court judge delivered his verdict.
She says: “In line with every previous announcement on the FAS, the reality is so different from the rhetoric. How long will the Chancellor insist on playing games with this issue and leaving people who saved all their lives still begging and fighting for justice? He needs to demonstrate his qualities of leadership, compassion and integrity to sort this scandal out properly.”
Altmann says a leaked memo - from Hutton to the Parliamentary Labour Party – states the extra cost of increasing the FAS payments to PPF levels for all the victims would cost just £2.5bn over 60 years - compared with the £1.9bn already earmarked for the FAS.
She says: “In other words, to sort this out in a fair manner would cost just an extra £600m over 60 years and this amount would also be further reduced because it is a gross figure. After tax and benefits are accounted for, the net additional cost will be around £400m.”
“Why hold back this last bit of funding when we are so close to a solution? The extra cost of a fair settlement is tiny, yet the agony goes on.”
She argues over 60 years the amount would be hardly noticeable in the government’s budget, as she points out in the last year DWP officials overpaid £725m in benefits to people not entitled to them – money which can never be recovered.
“So in just one year, official mistakes in our hugely complex benefit system cost taxpayers more than the entire 60 year extra cost of sorting out the biggest scandal in UK pensions history.”
She suggests Ministers should admit government maladministration immediately and make a commitment to find the extra £600m to allow these people to get on with their lives, otherwise “MPs will defeat the government via amendments to the Pensions Bill to force a settlement”.
Altmann adds: “The chancellor could have shown true leadership in the budget by apologizing for the suffering and taking responsibility for sorting the issue out properly. Sadly, he did not rise to the occasion.”
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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