UK BUDGET Brown quadruples pensions assistance to staff of bust firms UPDATE

UK BUDGET Brown quadruples pensions assistance to staff of bust firms UPDATE

	Published : Wed, 21 Mar 2007 17:52 By : Agencies Print this Story

(Updates with further comment from pensions industry experts)

LONDON (Thomson IM) - Chancellor of the Exchequer Gordon Brown today said he was increasing the budget of the Financial Assistance Scheme (FAS) by 6 bln stg to 8 bln stg to cover 'every one' of the 125,000 workers who have lost their pensions as a result of their employers becoming insolvent.

The Financial Assistance Scheme offers help to workers who have lost out on their pension because their scheme was under-funded when it started to wind up, and the employer is insolvent or no longer exists.

The FAS was designed to cover the period between Jan 1, 1997 and April 5, 2005. The Pension Protection Fund took effect in April 2005.

The chancellor's announcement follows a recent High Court decision that said it was wrong to completely reject the Parliamentary Ombudsman's report into collapsed pension schemes. A report by Ann Abraham, the Parliamentary Ombudsman published last year found that the government was guilty of 'maladministration' and should consider offering compensation to victims who lost all or part of them pensions when their schemes collapsed.

In his budget speech, the Chancellor said: 'There are 125,000 people who, through no fault of their own, when their employer became insolvent, lost their work pension.

'And the Secretary for Work and Pensions is announcing that he will extend the Financial Assistance Scheme from its present budget of 2 bln stg to a total of 8 bln stg so that every one of the 125,000 workers will now receive help.'

The chancellor added the minister would also 'investigate in full, the assets within the affected schemes and how we can use them further to support affected pensions.'

Stephen Yeo, a senior consultant at consultant Watson Wyatt, said: 'This is of course welcome news for all those who have lost their pensions because of insolvent employers. But it is unfortunate that this is extra settlement has had to be dragged out of the government.

'These people have been living in uncertainity for many years and this uncertainity has been as bad as the loss itself.'

David Phillips, a director of BDO Stoy Hayward Investment Management Ltd added: 'Whilst this is to some extent a confession of the government's failures, and perhaps an attempt for the Chancellor to curry favour before becoming leader, it is nonetheless a worthy and very welcome gesture.'

Jarrod Parker, development manager at financial services firm Alexander Forbes, said the are al question' is how quickly this extra allocation can get into the system.

'A headline grabbing announcement is great for political capital - but some pensioners from bust schemes have been waiting ten years for financial assistance which has not been forthcoming. The government needs to pull its finger out and pay pensioners proper compensation before it is too late,' he said.

By Raji Menon: +44 (0) 20 7422 4954; raji.menon@thomson.com

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