House of Commons to vote on amendments to Pensions Bill
by Dr. Ros Altmann
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It looks as though the Government is about to be forced to properly compensate the victims of pension scheme wind-ups.
Amendments to the Pensions Bill have been tabled today, calling for the hopelessly inadequate Financial Assistance Scheme (FAS) payments to be topped up to the more generous Pension Protection Fund levels. These payments should be made from scheme assets immediately and, if trustees do not have sufficient assets to in the schemes, the Government must make funds available to pay those who are already past their scheme pension age quickly, rather than having to wait for the hopelessly inefficient FAS system to pay out. The administration of the FAS should be passed over to the PPF.
This will not require extra funding from taxpayers. The amendments call for a Pensions Lifeboat fund to be set up, which will initially receive loans from the Government, but those loans will be repaid when the Lifeboat fund collects in assets from unclaimed financial sector funds, including unclaimed pension assets.
The amendments are being tabled by David Cameron, Frank Field, Alan Simpson, Menzies Campbell, George Osborne, Philip Hammond and other MPs who are calling for the Government to change its stance on this issue. This is a truly cross-party initiative which will demonstrate to the Government that the will of Parliament is to ensure justice is achieved for those who listened to official guidance which told them to save in their employers’ pension schemes and that their money would be properly protected by law if their scheme wound up.
So far, the Government has denied any responsibility for the plight of these pension scheme members, even after unequivocal verdicts by the Parliamentary Ombudsman, Public Administration Select Committee, European Court of Justice and High Court Judicial Review. Now, after the revelations of advice prior to his decision to remove the dividend tax credits in 1997, it has become clear that the Chancellor sacrificed these people’s pensions for the sake of cutting taxes for big business. He bears direct responsibility for their plight, although he has refused to admit this so far.
Some commentators have suggested that the removal of ACT relief was not the most important factor in the pensions crisis, for these particular schemes, it was often the final blow that killed them off. Gordon Brown’s incompetent oversight of the occupational pension system has caused untold misery for tens of thousands of members of hundreds of smaller pension schemes. The Chancellor’s advisers made clear they had absolutely no information at all on any smaller schemes. They also made clear that not all schemes were in surplus so that the removal of tax relief would require imminent increases in employer contributions to replace the lost income. The result was that weak sponsoring employers could not benefit from the cuts in corporation tax (as they were not making profits) and they could not afford the increased pension contributions, so the members were left at the mercy of markets and annuity rates on wind-up.
The Chancellor was offered the chance to wait in order to gather more data, or to phase in the changes rather than removing all at once, but he recklessly carried on regardless. Again, the Chancellor was warned that annuity rates would worsen as a result of his tax changes, but still he ignored the consequences of this for members of final salary schemes which wound up. He did not set aside a single penny of the £5billion a year to help those whose pensions were badly affected by his policies.
It is astonishing to see that the Chancellor continues to pretend his decision was the right one. It was not right for these schemes. The Chancellor has behaved like Robin Hood in reverse. He took money out of workers’ pension schemes and gave it to profitable companies, saying that everyone benefited! This is nonsense. That is like taking money away from Peter, give that money to Peter’s brother, and saying Peter is not really worse off. Gordon Brown damaged weaker pension schemes, removed some of the institutional underpinning of the stock market and failed to put in any measures to offer a rescue to those who would inevitably lose out.
He can no longer escape the consequences of his actions. On Wednesday, there will be a vote in the Third Reading of the Pensions Bill which will call for the amendments required to put an end to this awful chapter of pensions misery and finally give these good people the justice they deserve. I am optimistic that enough Labour MPs will vote with their conscience and for their constituents, to force a change of policy on this issue.
Watch this space…