Pension savers offered protection

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The Independent Online

The Government took a major step yesterday towards ensuring that pension savers in companies that go bust do not lose all their entitlements.

The Government took a major step yesterday towards ensuring that pension savers in companies that go bust do not lose all their entitlements.

The move comes as the Government faces a backbench rebellion if it fails to compensate the some 60,000 workers who, after years of saving, have been left with little or no pension when their companies went bust.

Although the latest move will not effect those who are already suffering, the Government yesterday said it would bring in laws to share out pension scheme assets more fairly.

"While these measures do not solve the pensions problems caused by company failure, they help share the pain more evenly. By putting future pensions higher up the priority list, at least everyone is more likely to get something after a wind-up," Tim Keogh, a partner at Mercer Human Resource Consulting, said yesterday. "The proposed solution is not perfect but it should avoid cases where the present rules have caused serious injustice."

At present, when a company goes bust and its pension fund is in deficit those who have already retired get their pensions guaranteed in full.

The remaining assets are shared out to the remaining workers, leaving some, who may have contributed to their scheme for 40 years, with as little as 14 per cent of the pension they thought they would get. The new rules will improve this situation.

"Pensioners will still be given higher priority - and with good reason," Mr Keogh said. "This issue will only be finally addressed when the Pensions Protection Fund is implemented in 2005, providing a minimum level of benefit for all members.

"Although the new measures are only a stop-gap before the PPF comes into effect, we're still pleased to see a firm date for these changes."

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