Press Release welcoming NAPF support for improved FAS
by Dr. Ros Altmann
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Ros Altmann says ‘Tens of thousands of people have had their hopes raised by Government claims that it really wants to help them, but this is a cruel deception. These people are being strung along, with delaying tactics, which seem designed to postpone (perhaps until after a General Election) the admission that almost all of them may simply receive no help at all.’
The National Association of Pension Funds (NAPF) has written to Alan Johnson, Secretary of State for Work and Pensions, accusing Ministers of being dishonest with members of winding-up pension schemes, who are still waiting for details of the assistance Government has promised to replace their lost pensions. These members were assured by Government bodies that their money was safe and protected by law, yet they lost most or all of their promised pensions when their employer schemes wound up. After a public and Parliamentary outcry, the DWP announced a £400 million ‘Financial Assistance Scheme’ (FAS) to help these people, and Ministers promised that the level of assistance from this FAS will be substantial, but the NAPF confirms this is not possible. The DWP has suggested a maximum pension under this FAS of £12,000 a year (irrespective of the amount of pension these members have lost), with a minimum pension of £10 per week. However, NAPF calculations confirm those which I released some weeks ago, that the £400 million could provide the maximum amount to less than 100 people a year! Even if it were only to pay the minimum £10 a week , it could help just 2000 people a year. This is out of a total of well over 65,000 who have lost out. The NAPF urges the Government not to mislead members with this ‘ill-thought and inadequate Assistance Scheme’. As it so rightly says, ‘we have had enough experience of policies which appear to promise something but do not deliver’. The reason these people have lost out in the first place is that the Government’s Minimum Funding Requirement (MFR) did not actually ensure adequate funding levels for pensions, even though Government assurances led members to believe that it would.
The NAPF urges the Government to provide more funds for the FAS and to consider alternative sources of funding, to add to the £400million, such as unclaimed assets of £2.5billion from National Savings, or the £27 billion surplus in the National Insurance fund.
Ros Altmann, who has campaigned to persuade the Government that it must compensate these innocent victims of regulatory failure, says that it is vital the DWP changes its approach to this issue now. Tens of thousands of people have had their hopes raised by the Government claiming it really wants to help them, but it is only pretending to do so. The FAS is a cruel deception, appearing to offer the possibility of meaningful help to people whose lives are in ruins, yet the Government knows that it will not really do so. These people are being strung along, with delaying tactics, which seem designed to postpone (perhaps until after a General Election) the admission that almost all of them will simply receive no help at all, unless a more realistic approach is taken and more funds set aside.
Two things are absolutely vital. Firstly, the winding-up schemes should stop buying annuities, so that their assets can be pooled in a central fund to pay pensions on an ongoing basis, rather than using all the money to buy annuities for those already retired and leaving nothing for others. Secondly, the Government must commit more money, over a long period – something like £75 million a year for 40 years or so – which could provide proper help to replace the pensions these people saved for and were promised. It is impossible, otherwise, to restore credibility to pensions policy, or to Government promises of protection. Members from all political parties have signed an Early Day Motion (EDM40) calling for this to be done and the Parliamentary Ombudsman is currently investigating complaints alleging maladministration of occupational pensions by successive Governments. This inquiry could force the Government to compensate, but the members are suffering dreadfully in the meantime, as they do not know what their future holds.
The NAPF has also urged the Government to be honest with the public about the level of security provided by the Pension Protection Fund (PPF) in future. It points out that the DWP guide to the Pensions Act 2004 makes no mention of the possibility that the Government could decide to reduce the compensation levels paid out by the PPF in future. It is vital that the Government is honest with the public from the outset, to avoid a repeat of the dreadful problems suffered when members were not warned of the risks to their pension security if their scheme wound up.
No more false promises. The people who have suffered in the past, without any warning, must be compensated and all members should be warned of possible risks in the future.