DEPARTMENT FOR WORK
AND PENSIONS News Release (PENS-039) issued by The Government News
Network on 20 September 2007
Minister for
Pensions Reform Mike O'Brien has called on trustees to
cooperate with measures to speed up Financial Assistance Scheme
(FAS) payments to people aged 65 and over.
The payment process is to be simplified to get around delays
caused by trustees not applying for FAS "initial
payments" to top up interim pensions paid by the winding up
schemes. There should be no good reason for trustees to not ensure
that eligible members receive FAS benefits.
Payments at 80 per cent of expected core pension (subject to a
cap) can be made to eligible members of winding up schemes in one
of three ways:
* The FAS will pay 80 per cent of core expected pension in full
to members of winding up schemes, even if no interim pension is
being paid by the scheme itself. This removes the expectation of
pension payment from schemes still in wind up.
* Where trustees wish to pay interim pensions in line with scheme
funding positions, the FAS can top these up to 80 per cent as before.
* Trustees can pay the 80 per cent from the assets available in
their scheme if they feel this is appropriate, taking into account
their duty to act in the best interests of their scheme members -
with payments to eligible members guaranteed in the longer term by
the taxpayer. Trustees should contact the FAS unit for help to
calculate payments.
Minister for Pensions Reform Mike O'Brien said:
"We are determined to get help to people who are entitled to
money now and we need the cooperation of trustees of winding up
schemes to achieve this.
"Some trustees have been very helpful. However, the response
of a number of trustees so far has been disappointing. Some 200
schemes in wind-up have not even applied for initial payments for members.
"The FAS has been working closely with trustees to obtain
the applications and data needed. We know that some trustees may
have reasonable grounds for not applying for initial payments,
such as the scheme being close to wind-up or members not yet
having reached 65. However, we believe there is scope for more
schemes to request initial payments.
"The greater flexibility we are announcing today means that
there should now be no good reason for trustees not to apply for
FAS payments, or alternatively to pay benefits to eligible members
at FAS levels themselves."
Requests for the FAS to pay 80 per cent of core expected pension
in its entirety to members of winding up schemes should only be
made by trustees where they are confident that final FAS payments
would be expected once the scheme has completed winding up.
To receive FAS help, trustees of qualifying schemes need to apply
for payments, tell the FAS about people who are approaching or
over 65, and return information including details on how much
pension members had accrued within their scheme.
Where schemes wish to make payments at 80 per cent levels
themselves, the FAS unit will support trustees to calculate such payments.
Ongoing meetings with trustees are having a positive effect upon
applications for initial payments. Since April, this year, the FAS
unit has met with 14 trustees representing 393 of the 667
qualifying schemes.
Notes To Editors
1. The level of "initial payments" was increased to 80
per cent of core pension, as part of the Pensions Act 2007.
Initial payments are made to members of pension schemes which are
still winding up. The level of initial payments is now in line
with payments to members of schemes which have completed the
winding up process.
2. Regulations have been laid under the Pensions Act 2007
requiring trustees to stop buying annuities except where a binding
commitment has been entered into, or the FAS scheme manager
considers it appropriate for a scheme to continue buying annuities
for its members. This will support the work of the Young Review
which is looking at how better use can be made of the assets in
the FAS-qualifying schemes. The regulations will come into force
on 26th September, subject to the Parliamentary process.
3. The Government has committed to match any additional funds
generated by the Young Review to increase FAS assistance further
towards 90 per cent of core expected pension. Options for making
better use of the assets in FAS schemes include bulk-buying of
annuities or pooling the available assets in one fund.
4. It is not anticipated that allowing winding up schemes to pay
80 per cent of core pension themselves will significantly impact
upon the level of assets available in FAS-qualifying schemes and
the work of the Young Review because the number of eligible people
aged 65 or over is an estimated 8,500, of which 2220 are already
receiving FAS payments.
5. The Government announced in March that the FAS would be
extended so that all 125,000 people who lost pensions when their
schemes started winding up under funded would receive 80 per cent
of their core expected pension guaranteed by the taxpayer, subject
to a cap of £26,000 per annum. A total of £8bn in cash terms, or
£1.9bn in Net Present Value, has been committed to the scheme. The
cap currently stands at £12,000 but will be increased to £26,000
by the end of the year subject to the Parliamentary process.
Textphone: 020 3267 5145
Website: http://www.dwp.gov.uk
NEWS RELEASE