 Many company pensions have been wound up, leaving older workers facing an uncertain future
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Pension theft
Pensions payback figures fiddled – a national scandal
The Prime Minister has been accused of using figures “designed to mislead” Parliament when discussing compensation for people who have lost much of their company pensions. He told MPs in March: “It is a £15 billion bill, and I honestly cannot commit the Government, or any government, to that.”
This was why he was rejecting the findings of the Parliamentary Ombudsman who ruled that the Government should compensate the 125,000 people who had lost a great deal of their pensions when their their pension schemes were wound up.
The Ombudsman said people had been misled by Government information which implied or stated that salary-related schemes were safe.
The £15 billion figure led the public to think that accepting the Ombudsman’s report would put an unfair burden on taxpayers for two generations. But was that figure correct?
The next day the Secretary of State for Work and Pensions, John Hutton, confirmed that the cost would be “in the range of £13 billion and £17 billion” and promised to explain how this huge cost had been calculated.
He has now revealed the sums. And in today’s money, it is much less – around £3.3 billion, spread over 60 years. The maximum cost in any one year is less than £100 million – around one five-thousandth of the annual amount the Government spends – 0.02 per cent and the equivalent of someone earning £25,000 spending an extra £5 a year. And that is in the peak year in 20 years’ time. In every other year it is even less than that.
Dr Ros Altmann, former pensions adviser to Downing Street and now campaigning for people who lost their pensions, told us: “The £15 billion figure was designed to mislead MPs into believing that the cost is far higher than it really is, to frighten them away from pressuring the Government into doing it.” The Government reached the £15 billion figure by adding inflation to the cost. So instead of working it out in today’s money, it added the cash amounts stretching into the distant future. So, for example, it inflated the cost in 2039 from the actual amount of £50 million in today’s terms to £375 million after 33 years of inflation. No one, but no one, accounts for future costs in this way.
In a surprise move the Government did announce that it would boost the Financial Assistance Scheme which helps some who lost money. Instead of helping only 15,000 people due to reach their scheme’s pension age by May 14, 2007, it will now give some help to another 30,000 who reach pension age by May 14, 2019. They will be paid a proportion of what they were expecting on a sliding scale, from 80% for the oldest down to 50% for the youngest. That still leaves at least 80,000 people suffering losses that will not be made up.
The Government may yet be forced to pay out more to everyone. In June, campaigners formally asked the courts to review the decision to reject the Ombudsman’s report as one which no reasonable minister could have made.
Are you involved in a pension scheme that has been wound up? Will the Financial Assistance Scheme help you? Comment here or go to Pensions crisis in Your Say and join the forum.
Support the pension theft victims - Sign our petition Written by Paul Lewis
This article was created: 4 August 2006.
This article was last edited: 13 November 2006.
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