Department for Work and Pensions
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Further financial assistance for people who lost pensions
Minister for Pensions Reform Mike O'Brien today pledged that the Government would match any additional funds identified by the Assets Review for people who lost their pensions.
The interim findings of the Assets Review, led by Andrew Young of the Government Actuary's Department, were published on Monday.
The review reported there are £1.7bn of assets in occupational pension schemes that qualify for help from the Financial Assistance Scheme (FAS). It said that the current practice of each scheme purchasing annuities for their members, which are then topped up by the Government, may not offer the best use of these assets.
Following today's announcement, the Government hopes that schemes will now stop expending scheme assets on annuities, and urges trustees to cooperate in order to get a better outcome for members. Alternative approaches which could increase the value include bulk purchase of annuities and pooling of assets in a single fund.
Mike O'Brien said:
"The Government believes that the cost of extending the FAS towards 90 per cent can now be met by making better use of the assets remaining in pension schemes, matched by a further contribution from Government
"We will need the cooperation of every pension scheme to get there. We are committing today to match the extra funds that the review identifies with a goal of moving towards 90 per cent of expected core pension for all recipients.
"Those extra funds will be based on the amount of assets remaining in schemes. Trustees must continue to act in their members' best interests, but we hope they will now take the view that those interests may not be served by expending scheme assets on annuities.
"The Government will match the extra funds that the Young Review identifies as and when these are released by trustees - and we expect this to be achieved as quickly as possible."
Notes To Editors
1. A copy of the Assets Review interim
report is available at http://www.dwp.gov.uk/pensionsreform/fas-asset-review.asp
2. The report concentrated on identifying the value of assets
in FAS schemes, their ownership and stewardship; potential uses of
these assets and whether there are options to increase the value;
other non-tax sources of funding; and the key issues relating to
solvent employers.
3. The Government has announced an
extension of the FAS so that all 125,000 people who lost their
pensions will receive 80 per cent of their expected core pension.
It has committed £8bn in cash terms towards the FAS, or £1.9bn in
net present value.
4. The review intends to undertake further
data collection and consultation over the summer. Its final report
will be published before the end of the year.
Website: http://www.dwp.gov.uk
