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Government gives in on lost pensions

The Pensions Action Group, with the support of Saga, have been pushing hard for pensions justice

Up to 140,000 people who lost some or all of their company pension will get more compensation after a major climbdown by the Government, writes Paul Lewis.

After years of campaigning and lobbying, strongly supported by Saga, the Government has agreed to pay 90% of the full pension benefits they were expecting.

Dr Ros Altmann who has campaigned tirelessly for the pensioners said “Finally we have won - it is unbelievable. I am delighted. These people really deserve it. It will allow them to get their lives back.”

The improvements to the Financial Assistance Scheme announced today will cost an estimated £935 million over the next 60 years. Between a half and two thirds of that will come from taxpayers. The rest will come from improved use of the assets already in the wound up pensions.

The people affected paid into a company pension scheme which was wound up before 6 April 2005. They will now get essentially the same compensation as people whose scheme went out of business after that date through the separate Pension Protection Fund paid for by the pensions industry.

The changes have the support of the Parliamentary Ombudsman Ann Abraham. In March 2006 she found the Government guilty of maladministration and recommended compensation for the people affected. She says the announcement of these changes “constitutes full compliance with my key recommendation and…also remedies the deficiencies in the Financial Assistance Scheme identified in my report.”

Under what Secretary of State for Work and Pensions Peter Hain called its "just and final settlement" the Financial Assistance Scheme will now pay 90% of the expected benefits of the pension. Previously it paid only 80% of what it called 'core' benefits, estimated to be worth about 65% of the full benefits due. Pensions earned from 1997 will be raised with inflation up to 2.5% a year and the £26,000 cap on the pension payable will also have its value protected.

The minimum age to get the pension will be cut from 65 to the scheme’s pension age, though not to less than 60 except in cases of ill health. Members will also be able to draw a tax-free lump sum.

The Government has extended the payments to 11,000 people whose pension scheme went into liquidation even though their employer remained solvent.

The Government will take over the assets of the wound up schemes and pay the benefits direct to the 140,000 people affected. Campaigners now say the money must be paid quickly to tens of thousands of people who have already reached retirement age.

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By: Paul Lewis