FAS time to sort it out, not string it out
by Dr. Ros Altmann
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HAS DWP WON THE DAY? WILL TODAY’S FAS ANNOUNCEMENT FINALLY STOP STRINGING THIS OUT AND START SORTING IT OUT?!
The Government may come up with a package of improvements to the Financial Assistance Scheme (FAS) that could, at last, deliver meaningful help to all the victims of pension scheme wind-ups. The DWP Review of Scheme Assets and the Government response, are expected later this morning. Andrew Young’s report has shown that it is possible to make better use of the £1.7bn of assets that are currently in failed pension schemes. Instead of having to buy expensive annuities, the assets could be used to pay pensions over time. This would allow payments from the FAS to be increased at least into line with the Pension Protection Fund (PPF).
It is simply unacceptable that members whose schemes failed many years ago have been treated so much worse than those whose schemes failed since 2005. Before the PPF started, members of final salary schemes were led to believe – by the Government – that their pensions were 100% safe. However, the Government had not told the truth about pension security and many long-serving older workers ended up losing their whole life savings in the scheme and getting no pension at all. They have been battling for well over 5 years to get the Government to organise a proper rescue.
After the 100% bail-out of Northern Rock savers, within a few days, at a potential cost of billions of pounds of taxpayers’ money, there was no longer any credible justification for refusing to settle the pension victims’ claims immediately. Northern Rock savers were never told by Government to save in Northern Rock, nor that their money was completely safe.
The Parliamentary Ombudsman, Public Administration Committee and High Court Judicial Review verdicts all ruled that the Government misled these workers about the safety of their pensions and must properly compensate those affected. So far, sadly, the victims have had plenty of ‘spin’ but little real help. Gordon Brown promised billions of pounds of assistance, but the truth is that the FAS has failed to deliver. It has so far only paid out around £11million to about 3,000 people and cost £10million to administer.
Most of those who should already be receiving their pensions have not had a penny and are still struggling to work, often despite serious illness, just to make ends meet. They saved for decades in a pension scheme that they were told was totally safe and have been a thorn in the Government’s side for the past few years. Many of them have protested naked to highlight that they were stripped of their pensions! This has proved a political embarrassment for the Government and has also kept undermining confidence in pensions, which, of course, makes pension reform rather difficult.
At last, the new DWP Ministers seem to have recognised that the spin must end and a proper resolution is required. I have been helping the DWP try to sort out this scandal in a realistic way over the past few weeks and am hoping that the announcement later today will reflect all the issues that must be sorted in order to deliver a just settlement.
These are the essential points that must be addressed.
- All those affected must be included in the FAS, whether their employer is solvent or not.
- FAS payments must start at the member’s normal scheme pension age, rather than forcing everyone – even women – to wait until age 65.
- There is some inflation linking in the PPF so the FAS should offer at least the same.
- The PPF allows a tax free lump sum, so the FAS should also allow this.
- Importantly, there should be proper provision for ill-health early retirement. Some of the victims are desperately ill and still not entitled to any money, whereas they would already have received payments from their scheme if it had not failed. They may not live to age 60 or 65. How can they be left out?
If these elements are all included, as well as paying 90% of the basic scheme pension, then I believe this will be a good deal. It is not everything they deserve and is not nearly as much as the Parliamentary Ombudsman recommended, but after years of fighting it seems to be the best that we can get the Government to agree and it does represent a major victory for those who have suffered so much, for so long, despite doing everything right.
Of course, the payments must start quickly and must be efficiently administered, so we will need to watch what happens in the coming weeks, but I do sense a new mood among DWP Ministers and officials that there is urgent work to do and that they want to get on with it.
Hopefully, there will be thousands of people who are going to have a much happier Christmas after this announcement has been made. About time too!
Dr. Ros Altmann