They've paid in for years. Now who will pay their pensions?
Thousands wait for compensation over failed company funds
Sunday 15 October 2006
A government pensions lifeboat launched for workers who lost their retirement funds when their companies went bust is badly adrift.
The Financial Assistance Scheme (FAS) had hoped by the end of this year to make 900 payments to those ex-employees who are aged over 65 and most in need. But even this low initial target "cannot be guaranteed", a spokesman for the Department for Work and Pensions (DWP) admitted last week.
The FAS was set up in 2004 to help people whose companies failed between April 1997 and April 2005. But the DWP has not administered the scheme efficiently and, so far, only 394 people have received payments, totalling £1.4m.
Next month, the Pension Action Group (PAG), representing up to 125,000 pensioners left out in the cold - 7,000 of them over the age of 65 - is to march on Whitehall and hand over a letter at No 10 Downing Street demanding recompense.
Earlier this year, the Parliamentary Ombudsman and MPs on the Public Administration Select Committee (PASC) found the Government guilty of - respectively - "maladministration" and being "at best naive, at worst misleading" in official advice leaflets for workers in final salary pension schemes.
The Ombudsman, Ann Abraham, claimed in her report that the Government misled workers by encouraging them to invest in company schemes that were not adequately funded.
The Government has repeatedly argued that the situation is not its fault and has so far refused to pay any compensation.
Saga, the financial services group for the over-50s, has backed the PAG's campaign - the first time it has publicly expressed a view on government policy. It is considering an early-day motion in Parliament to raise awareness of the problem, which affects many of its members.
A petition launched by Saga two months ago in protest at the Government's intransigence has so far secured 5,500 signatures from the public and at least 17 from MPs.
In the meantime, thousands of pensioners who have lost great chunks of their retirement savings continue to battle on. Stan Carpenter, 67, of Essex, has had no payment from the FAS and struggles to survive on a private pension of £17 a week on top of his state pension.
After 35 years paying into a final salary scheme at Perivan, a printing company that collapsed two years ago, he has been hit with a double blow. As well as losing most of his entitlement to an income in retirement, he has missed out on the second state pension, formerly known as Serps.
"It's a double whammy," he says. "I had to come out of Serps - that was part of the pension deal." The money that would otherwise have gone into Serps was invested in his occupational fund.
Mr Carpenter says he and his colleagues were led to believe that their company pension scheme was safe: "I should have been retired on [a private pension of] £95 a week."
Unsurprisingly, the shortage of money over so much time is weighing heavily on Mr Carpenter. "They've said [the FAS] payment will be backdated, but that's only as long as we are alive. I'm very bitter about it."
Mr Carpenter regularly telephones the FAS but has seen the progress of his payments mired in administrative delays.
The DWP estimates that some 40,000 people will eventually receive payouts from the FAS. The rest will, if the Government carries on getting its way, receive nothing because of the rules of the FAS.
Priority payments go to those of state pensionable age, or close to it (recipients are treated as single persons; previousli included benefits for spouses are not part of the calculations). After that, those closest to company retirement age take precedence. Anyone more than 15 years away is ineligible. So a 49-year-old who paid into a company fund for 20 years, and whose employer then went to the wall, will get nothing.
The rules also dictate that individuals will get no more than 80 per cent of their final salary, and that payouts should be capped at £12,000 a year.
Ros Altmann, a former adviser on pensions to Downing Street and the Treasury, is spearheading the campaign for justice and is the spokeswoman for the PAG.
She has lodged an application for a High Court review of the Government's rejection of the Ombudsman's "maladministration" verdict. A request has been made for a hearing to take place as soon as possible, she says, because of the urgent nature of the issue and its impact on the health of those pensioners involved.
Ms Altmann hopes for a hearing in January.
"This isn't just about pensions," she says. "It's about our parliamentary democracy being at stake.
"Both the PASC and the Ombudsman found against [the Government] and it has so far ignored them. It means a future government can just do what it wants."
A DWP spokesman stresses that the department still hopes to make 900 payments, as planned, by the end of the year.
"We are engaging with pension scheme trustees and administrators in order to achieve this," he says. "We're aware that more could be done but cannot guarantee that we are going to meet the target."
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