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Fig leaf for stripped pensioners
The Government is extending help to all 125,000 people who lost part or all of their pensions when their schemes were wound up between January 1 1997 and April 5 2005, writes Paul Lewis
This surprise Budget announcement brings the second extension of the so-called Financial Assistance Scheme (FAS) and follows defeats in both the English and the European courts, which made some improvement inevitable.
The European Court in particular made it clear that the benefits of the FAS were inadequate. But it said they would have been adequate if the FAS had been as good as the Pension Protection Fund (PPF) – which steps in for funds which collapsed from April 6 2005.
The changes announced on Budget Day will not bring the FAS up to the PPF level.
The new FAS will
• Pay one rate of 80% of core pension benefits – at the moment the percentage ranges from 50% to 80% depending on date of birth with younger people getting nothing at all.
• Raise the upper limit on the pension that will be paid from £12,000 a year to £26,000.
• Include people whose pension would be less than £10 per week.
But there will be no change to other aspects which limit the benefits paid
• No index linking of pensions
• Minimum qualifying age of 65 even where the scheme’s pension age is lower
• Half the pension paid to a surviving spouse or partner
The revised Financial Assistance Scheme will still offer worse benefits than those provided by the Pension Protection Fund for people whose scheme collapsed on April 6 2005 or later. It will fall short in three main ways.
The PPF provides a pension that is
• 90% of the basic expected benefits
• Maximum pension in 2007/08 of £29,928 (this limit rises each year with inflation)
• Pension index-linked once in payment up to a maximum of 2.5% a year
Overall the changes will increase the cost of the Financial Assistance Scheme from £830 million to £1.9 billion in today’s money. But that cost is the total over the next 60 years. And the Chancellor followed the Government’s normal deceit of inflating these figures by using the totals over 60 years with inflation added on. On those figures the cost will rise from about £2 billion to £8 billion.
This article was created: 21 March 2007.
This article was last edited: 29 March 2007.
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