21 July 2004
Malcolm Wicks MP, Minister of State for Pensions
Financial Assistance Scheme Consultation Event
21 July 2004
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I’d like to thank you for coming today, at short notice, to share with us and each other your ideas on the future direction of the Financial Assistance Scheme. I am heartened to see such a range of people here.
Today we will listen to members of schemes affected by this issue, the pensions professionals who will be involved with the administration of the Financial Assistance Scheme and those who will be providing advice to individuals as they make decisions about their future pension needs. All of you have a strong and legitimate interest in the final design of the Financial Assistance Scheme and I am glad that today you are able to share with us and each other your views.
It was with great pleasure that, in May, I announced our intention to create an assistance scheme to offer substantial help to those who have lost out on their pension as a result of their occupational scheme having wound up underfunded.
In the future, members of defined benefit occupational pension schemes will enjoy the security offered by the Pension Protection Fund, financed through a levy on those schemes that are covered. However, this offers no comfort to members of schemes that began winding up in advance of this protection.
You will all, no doubt, be aware of the call made by some, over the last year, to extend the Pension Protection Fund to schemes that had already wound up underfunded. We resisted this pressure, and rightly so. The Pension Protection Fund is akin to an insurance scheme, and cannot protect you against events that have already happened.
We have also been clear that the Government cannot accept liability for the losses suffered by members of these pension schemes, or private pension losses in general. This would ask the Government to nationalise financial risk. It would be wrong to ask the taxpayer to write a blank cheque.
We did, however, remain open to suggestions about how something could be done to remedy the situation. I have already met some of those present today to listen to their experiences and explore their ideas. I am grateful for the dedication that many people have shown in raising their concerns with me.
I have spoken before about how moved I have been when hearing the shattering experiences of those who have been left with their legitimate expectation of a comfortable retirement in tatters. I make no apology for speaking about it again here. Both Andrew Smith and myself have been left in no doubt of the seriousness of this issue and the devastation it has inflicted on individuals and their families.
At the same time, I have been impressed with the pride and restraint with which these people have explained their situations to me. I understand that they are people who have not received the benefits they expected when they took responsibility for their own pension futures. We have always been clear that if we could do something to help these people, it would be the right thing to do.
It is for these reasons that I was so pleased to introduce provisions for a Financial Assistance Scheme into the Pensions Bill, supported by £400 million of public money. As I said at that time, we hope that further support will be forthcoming from other sources and both Andrew Smith and I are in discussions to encourage this. We are already receiving support in kind from the pensions industry in the form of advice as we shape the technical aspects of the scheme.
I know that the funds available for the scheme will not help all of those who feel wronged. It will not give everything that they might want. We have stated that it will provide assistance at a level less than that provided by the Pension Protection Fund, which will be financed through a levy on occupational pension schemes. I do, however, believe that substantial assistance will still be offered to those who have lost out.
We have already begun work on developing the scheme. This work has raised its own set of complexities, and we are working with a group of experts to enable us to understand the issues involved. We also need to ensure that we have a firm grasp of the extent of the problem, which will involve gathering detailed information. All of this will take time.
I understand the desire to have an assistance scheme operating as quickly as possible. I know, however, that you will agree with me it is important to get the detail right. Other speakers this morning will outline to you the steps we are taking to develop the scheme, and the nature of the expertise we are drawing on.
Through the publication of our data report at the end of June, we started to share some of our initial findings on aspects of the Financial Assistance Scheme. I am sure that you will want to talk about these today.
But there are still many features of the scheme that we need to work out. I was clear when I announced the intention to create this assistance scheme in Parliament that the detail of how the scheme will operate will be developed in consultation with stakeholders. It is vital that we strike a fair balance when deciding how the scheme will work, and this can only be achieved by listening to those who will be affected, both personally and professionally, by its implementation.
This event forms part of that consultation, where your views and concerns on the future design of the Financial Assistance Scheme are welcomed. Although we will discuss with you our thinking so far, this is primarily an opportunity for an open and constructive conversation around your ideas.
As I have said, we need to hear your thoughts and listen to your advice. I am, unfortunately, unable to stay for the rest of this consultation event, and I offer my apologies for this. I look forward to hearing about the discussions that will take place and the views you will share.
I appreciate that some of you may have questions you would like to ask me. I am able to take these for a short while.