Thousands of people who lost pensions when their employers went bust will get at least 90 per cent of their pensions guaranteed, as the final phase of the Financial Assistance Scheme (FAS) regulations are put before Parliament. The Government will pay out £3.5 billion to around 150,000 people.
Minister of State for Pensions Angela Eagle said:
“The Government is completing its promise to provide a just and final settlement for those who lost pension savings when their employers went bust. There can be few greater cruelties than to find the pension you have earned has suddenly disappeared through no fault of your own. That is why the Financial Assistance Scheme, which we are completing with these regulations, is so important to around 150,000 people.”
Before the Pension Protection Fund (PPF) existed to help them, thousands of employees lost their savings between 1 January 1997 and 6 April 2005 when their defined benefit pension schemes were wound up without enough funds to pay their pensions.
FAS payments have been extended to members of schemes that wound up under funded although their employer was still solvent, and those in ill health and unable to work will get early access to their pension.
The FAS now provides help that is broadly similar to that provide by the PPF - at least 90% of the defined benefit pension accrued by individuals when their scheme began to wind up, which may be subject to a cap, paid from their normal retirement age.
The £3.5 billion cost is being part funded by the Government absorbing assets remaining in the affected pension schemes.
Responsibility for the administration of the FAS was transferred from the DWP to the Board of the PPF in July 2009, to establish a single organisation with responsibility for providing financial help to members of defined benefit pension schemes.
Notes to editors
1. The publication of the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010 provide for the transfer of an estimated £1.7billion assets to Government, as estimated by the Young Review; payment of lump sums to eligible members; and appropriate payments to be made to those members of schemes who would have received more from their pension scheme than the assistance payments FAS would otherwise provide had their scheme continued to wind-up and purchase annuities, rather than transfer assets.
2. The regulations follow a public consultation, which ended on 6 October. A copy of the Government Response to the Consultation is available at www.dwp.gov.uk/consultations.
3. It is estimated that the lifetime costs of the FAS will be £3.5 billion (Net Present Value). The Financial Assistance Scheme has paid out a total of more than £81 million gross since 2005, including £25.2 million so far in 2009/10.
4. The Government has guaranteed that FAS will provide 90% of the member’s accrued pension as at the date of wind up, which may be subject to a cap. This will be paid from the member’s normal retirement age, subject to a lower age limit of 60.
5. As at 31 December, 14,108 assistance payments are being made and a further 4,954 members have been assessed to be paid when they reach their normal retirement age. 101 members are receiving ill-health payments. 15 are receiving severe ill-health payments.
6. In total, it is expected that around 170,000 people will receive payments from the FAS. Of these around 150,000 would have expected to receive less than 90% from their under funded pension scheme.
7. 903 pension schemes currently qualify for the FAS.
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