DEPARTMENT FOR WORK
AND PENSIONS News Release (PENS - 022) issued by The Government News
Network on 23 April 2007
The Government
today announced details of a funding review with the aim of giving
further help to people who lost money when their pension schemes
wound up under-funded.
Minister for Pensions Reform James Purnell announced that Andrew
Young, Directing Actuary of the Government Actuary's
Department, would lead the review. The review will be advised by
panel of leading experts with experience in key areas, including
prominent industry figure Alan Higham.
Reviewers will provide an initial view in the summer and a full
report by the end of the year.
James Purnell said: "The extension of the Financial
Assistance Scheme announced in the Budget means that affected
people's pensions will be topped up to 80 per cent of their
core pension expectation.
"We believe this is the right amount for the taxpayer to
fund - but we are committed to looking at other sources of
non-public funding.
"So I'm pleased to announce that the funding review,
led by Andrew Young, is now underway.
"It will look at whether better use can be made of assets in
winding-up pension schemes, and whether other sources of
non-public funding, which have not already been allocated, could
boost assistance levels further.
"The review team has already started meeting key
stakeholders and will contact others shortly to invite their contributions."
The Government is to extend the Financial Assistance Scheme (FAS)
to cover members of schemes that began winding up between 1st
January 1997 and 5th April 2005, where a compromise agreement is
in place - and where it would have forced the sponsoring employer
into insolvency if trustees had demanded that the company honour
its pension promises in full. This will help an estimated 8,000 people.
Mr Purnell added: "The team undertaking the assets review
has been asked to establish whether there are schemes with a
solvent employer in different circumstances that should be
considered for eligibility."
The extension to the Financial Assistance Scheme announced in the
Budget increases the funding commitment from £2.3bn in
cumulative cash terms, to £8bn. This equates to more than doubling
the scheme in net present value terms, from £830m to £1.9bn.
The increase means that all 125,000 people who lost money when
their schemes started winding up will receive support equivalent
to 80 per cent of their core pension rights, up to £26,000 per year.
Notes To Editors
1. External experts advising the review are Alan Higham,
non-executive director of Higham Dunnett Shaw; Ashok Gupta, a
director on the board of Pearl Group Limited; Jane Samsworth, a
partner at law firm Lovells; Chris Martin, managing director of
Independent Trustee Services Limited; Dr David Blake, Professor of
Pension Economics at Cass Business School, and Director of the
Pensions Institute; Angela Hills, an administrator for Mercers
Human Resource Consulting Limited; and Martin Clarke, executive
director of financial risk at the Pension Protection Fund.
2. The 80 per cent level of support is from the taxpayer, and it
is not contingent on the release of any other funding source
identified by the review.
3. A Government amendment to the Pensions Bill 2006, which passed
the Commons stage last week, would increase levels of FAS initial
payments to 80 per cent of core expected pension - the same level
as FAS final payments to members of wound up schemes. Initial
payments, currently set at 60 per cent of core expected pension,
are available where schemes have not yet completed the winding up
process. The Government urges trustees of winding up schemes to
apply for these payments on behalf of their members.
Website: http://www.dwp.gov.uk
NEWS RELEASE