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'Lost' pensions plan unveiled

17/12/2007

The government has unveiled a £2.9 billion rescue package to compensate thousands of workers whose pensions were lost when their employers went bust.

Work and pensions secretary Peter Hain confirmed the assistance would help up to 140,000 people, including around 11,000 who also lost their retirement benefits as a result of failed company pension plans being wound up by solvent employers.

The announcement of the rescue package follows sustained criticism of the government by campaigners over the issue and the completion of a review by government actuary Andrew Young into how the pension benefits of affected employees could be paid in light of the failure of the corporate retirement schemes they were part of.

The Young review demonstrated how the residual assets in failed pension schemes, which totalled over £1.7 billion, could be used by the government to provide assistance to those who lost their retirement benefits.

Under plans announced by the work and pensions secretary today, 90 per cent of the value of their pensions will be restored.

The proposals bring the support available to those covered by a previous pensions rescue package into line with that offered by the current Pension Protection Fund (PPF), which was introduced two years ago.

The majority of those affected by today's announcement had been covered by the Financial Assistance Scheme (FAS), which offered a support net to employees whose company pension plans were wound up between 1997 and 2005.

Mr Hain said the package represented a "just and final settlement" for workers who lost their retirement benefits over the period.

"All those who lost their pensions had done the right thing by saving for later life.
They played by the rules, only to see their pension savings disappear through no fault of their own," he stressed.

"Although the government has been criticised over this matter, these are huge amounts and it is right that we have been able to maximise the return from residual assets in the schemes which collapsed so that the public purse has had value for money too," the work and pensions secretary added.

Speaking ahead of the announcement one campaigner criticised the inadequacy of the FAS and said the planned action by the government was necessary to restore confidence in the pensions system.

"I think this issue is one of the biggest reasons that people have lost faith and confidence in pensions, and it’s important for the country that people do have some confidence in pensions and save for the future," Dr Ros Altmann, spokesperson for the Pensions Action Group, told BBC Radio 5 Live.