James Daley: Can this pensions mess get any worse?
Saturday 28 January 2006
The plight of the 85,000 pensioners who lost most or all of their retirement savings when their companies went bust has gone from bad to worse in recent weeks.
As regular readers of this column may remember, the Government (reluctantly) first promised to provide compensation for these victims almost two years ago. Yet, as of last week, just 13 people had received a payout from the limp and chronically underfunded "Financial Assistance Scheme" (FAS).
Several of those whose need was greatest died before receiving a penny. Even the 13 who have been paid so far have been warned that they may have to return some of the money if it turns out that there isn't enough to go round for others in their scheme.
Meanwhile, those who were lucky enough to have begun withdrawing their pension before their fund went into wind-up have recently been told that their income is to slashed by a third. Some reward for a lifetime of work and saving.
Although the Department for Work and Pensions insists it is working as fast as it can to distribute the FAS funds, the desperately slow progress is of the Government's own making. When Chancellor Gordon Brown first gave the green light to the creation of the FAS in May 2004 (to avoid a backbench revolt), the then pensions minister implied that an additional £400m would be found from the public purse to fund it.
Behind the scenes, however, the Treasury told the DWP to use its own annual budget, ensuring that the department could not afford to plough any substantial additional resources into ensuring that the scheme was set up quickly and administered efficiently.
On a more technical note, the Government's refusal to pool the assets that were left in the defunct pension schemes (ie, running the FAS along the same lines as the privately funded Pensions Protection Fund) has ensured that victims will receive even less than they might have hoped.
Instead, the Government insisted on buying annuities for each individual member. And, due to the collapse in the yields of government bonds in recent weeks, the level of income that can be bought with an annuity is now much less than it was.
It still astonishes me that this issue does not get a higher profile in the media. That a Labour Chancellor is doing everything he can to ignore the plight of 85,000 hardworking and honest individuals - who lost a lifetime's savings through no fault of their own - is nothing short of scandalous.
Within the next four weeks, the Parliamentary Ombudsman will publish her report into whether the Government is to blame for letting these people believe their pensions were guaranteed. Although the initial report (which was ready in June) was believed to be scathing, it has since been lost in the corridors of Whitehall - no doubt to be watered down. The Conservatives and Liberal Democrats must now seize the momentum to ensure that the Government is forced to fully compensate the victims of this scandal.
nnn Which?, the consumers' association, is again moaning about the confusion over cash-machine charges, claiming that half the population don't know which banks will charge them and which won't. This isn't surprising; repeated surveys from the likes of Nationwide, warning that most ATMs now charge a fee, are bound to concern and confuse consumers.
But these surveys rarely explain that the growth of fee-charging machines has not been at the expense of free cashpoints. Almost none of the banks charge for cash withdrawals these days, and if they do, it is always clearly stated on the machine or at the point of withdrawal.
David Prosser is away
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