Department for Work and Pensions
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Purnell announces review panel and issues call for evidence
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
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