Government sets minimum pension payout

The Government gave its first indication of a major U-turn on pensions compensation yesterday, agreeing to a minimum level of payment for more elderly members of bust final salary schemes. It also committed itself to a review of the total compensation available for its much maligned Financial Assistance Scheme.

The Government gave its first indication of a major U-turn on pensions compensation yesterday, agreeing to a minimum level of payment for more elderly members of bust final salary schemes. It also committed itself to a review of the total compensation available for its much maligned Financial Assistance Scheme.

The FAS, which is set to start within a few months, is intended to provide compensation for the estimated 70,000 workers who have lost their retirement savings in bust company pension schemes in the past few years. The Government's promise of £400m to fund the scheme has been criticised as grossly inadequate. Experts estimate it would provide an income of £12,000 a year for just 200 people.

Malcolm Wicks, the Pensions Minister, said yesterday that all workers from qualifying schemes who were within three years of retirement when the FAS was proposed last May, will be guaranteed at least 80 per cent of their lost savings. He said FAS funding levels would also be reviewed in three years time.

The maximum benefit levels for younger workers who lost their pensions have yet to be decided. If the Government sticks to a maximum compensation limit of £12,000 a year per person, it will be forced to commit to extra funds for the FAS.