FAS news archive 2007
Speeding up FAS payments
23 November 2007
In September the Minister for Pensions Reform, Mike O’Brien, announced measures to help speed up payments to people aged 65 and over.
The FAS will now pay 80% of core expected pension to members of winding up schemes even if no interim pension is in payment. Where interim pensions are in payment they can still be topped up to 80% by FAS as now.
Also, trustees, if they feel it is appropriate, can pay 80% - FAS levels - of core expected pension from their available scheme assets. These payments are guaranteed by the Government. See leaflets FAS P1 - The Financial Assistance Scheme - a guide for individual scheme members (587KB) 
and FAS P2 - The Financial Assistance Scheme - an In Depth Guide for Trustees and Pension Professionals (363KB).
Government response to the consultation on the draft Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007
20 November 2007
Today the Government published its response to the consultation on the draft Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007. The Government is very grateful for the comments received. A final draft of the new regulations was also laid before Parliament today with a view to them coming into force by the end of the year. You can read a copy of the draft regulations (501KB) and the consultation response (243KB) . Please note that these regulations are subject to Parliamentary approval.
Review of the FASOU Data Gathering Process
In mid-May 2007, FAS requested that Mercer HR Consulting carry out a process audit. You can now read their report (93KB)
The Financial Assistance Scheme (Halting Annuitisation) Regulations 2007
6 September 2007
Regulations laid on Tuesday 4 September 2007 require trustees of schemes which have qualified for the Financial Assistance Scheme (FAS) to stop buying annuities for their members.
Subject to Parliamentary approval, the regulations will come into force on September 26, and prevent annuities being purchased for a period of nine months from that date.
Read the full press release
Read the Financial Assistance Scheme (Halting Annuitisation) Regulations 2007 in full.
Read the Guidance issued to trustees (39KB) on
the regulations.
Consultation on draft regulations for the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007
The consultation on draft regulations for the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007 was published on 29 August 2007.
Once the proposed regulations come into force around 125,000 people who lost pensions when their scheme began winding up under funded will receive at least 80 per cent of their expected core pension, subject to a cap. The changes also propose that the current cap is increased to £26,000 per annum and the de-minimis rule for FAS payments of less than £520 per year is removed. Also, some schemes will be included that began winding up between 1 January 1997 and 5 April 2005, where a compromise agreement is in place, and enforcing the debt against the employer would have forced the employer into insolvency.
You can read the full consultation paper. The consultation period expires on 9 October 2007.
Pensions Act 2007 - What this means for FAS
The Pensions Act 2007 received Royal Assent on 26 July. The Act contains a number of measures relating to the Financial Assistance Scheme (FAS) and other changes were announced prior to and during the Act’s passage through Parliament. The key developments are summarised below:
- The Government will raise the level to which FAS annual payments top up the ‘actual pension’ being paid to qualifying members to at least 80% of expected core pension (subject to a raised cap). This will apply to all qualifying members who reach 65, regardless of how far they may be from their normal retirement age now. The Government will also raise the cap from £12,000 to £26,000 and remove the de minimis rule that prevents payments of less than £520 a year. These changes will be introduced by regulations which we hope to come into force by the end of 2007. These regulations will also allow schemes that have entered into compromise agreements to qualify for FAS.
- The level to which FAS initial payments will top up any interim pension in payment to a qualifying member of a scheme that is still winding up will rise from 60 to 80% of core expected pension (subject to the cap). This change is effective immediately and the FAS Operational Unit will recalculate the assistance due to members for whom data has been supplied and contact them about any change in their entitlement. Trustees should consider whether the change means that other members may now qualify for FAS initial payments and supply their details.
- The Government does not intend to enforce the cut-off date for employer insolvency of 31 August 2007 announced by the then Minister of State for Pensions Reform on 27 February 2007. We will consult on whether there should be a cut-off date for insolvency and bring forward regulations in due course.
- The Government will be bringing forward regulations to place a temporary halt on the purchase of annuities by trustees of qualifying schemes that are still winding up. Trustees will be able to purchase annuities with the approval of the FAS scheme manager if he thinks it is appropriate for them to do so. These regulations are expected to be in place by October 2007 and will apply for nine months from the date on which they come into force. It is extremely important, therefore, that trustees keep the FAS Operational Unit informed about the progress of schemes towards completion of wind-up and, in particular, if consideration is being given to purchasing annuities for any members. Although regulations will not be in place until later in the year, the Government expects trustees to consider their approach to annuitisation very carefully and to involve their Customer Account Manager at the FAS Operational Unit in any decision before then.
- The Government has also welcomed the interim findings report of the Review of Scheme Assets being led by Andrew Young which were published on 16 July. The Review has given a strong indication that better use can be made of assets remaining in pension schemes that qualify for the FAS and the Government has promised to provide a matching contribution to any extra value identified by the Review with the goal of moving towards a 90% top-up rate. The final report of the Review is due before the end of 2007.
FAS Review of Scheme Assets launched
23 April 2007
On 28 March, Secretary of State for Work and Pensions John Hutton announced a review to examine whether an alternative treatment of the residual funds in affected pension schemes could supplement the committed Government funding of the Financial Assistance Scheme and bring payments from the 80% that has been committed from public funds nearer to 90% assistance levels.
The Review was launched on 23 April, the date when the Minister of State for Pensions Reform, James Purnell, published the terms of reference for the review.
The Review will provide an initial view in the summer, consult formally in the autumn and then report by the end of 2007.
Andrew Young, Directing Actuary at the Government Actuary’s Department, is leading the review. It is being advised by a panel of leading external experts that has been specially assembled to provide experience in key areas.
The Review Team has already met some key stakeholders and will be contacting others shortly to tell them about the review and to invite their contributions, including on how other non-public expenditure funding that have not already been allocated could be used to increase assistance levels.
In the meantime, we would like to invite suggestions on the best use of scheme assets from interested parties, and also suggestions on how other non-public expenditure funding that have not already been allocated, could be used to increase assistance levels. Pending a formal contact from the Review Team these can be sent to this email address adelphi.fas-review@dwp.gsi.gov.uk.
Find out more information about the Review.
A letter from James Purnell, Minister Of State for Pensions Reform, placed in the House on 23 April 2007
23 April 2007
- Read the letter from James Purnell (41KB)
A statement from John Hutton, Secretary of State for Work and Pensions
28 March 2007
"The Chancellor in his Budget statement on 21st March announced our decision to significantly extend the help provided by the Financial Assistance Scheme (FAS).
This announcement was the result of my reflection on the implications of the High Court ruling in the judicial review of the Government’s decision to reject the Parliamentary Ombudsman’s findings of maladministration by the DWP
My reflections have also been informed by the judgment of the ECJ in the Robins case. In that judgment, given on 25 January, the European Court indicated that the level of protection provided to some members of the ASW pension scheme fell short of the level required by Article 8 of the Insolvency Directive. But the ECJ also said the Directive did not require a guarantee of pension rights in full, and it gave a strong steer that damages would not be payable for breach of the Directive earlier than the judgment date. Having carefully considered the terms of the ECJ ruling, the Government believes that the enhanced FAS package announced last week offers a level of protection that is compliant with that judgment.
In its judgment in the judicial review relating to the Ombudsman’s report, the High Court directed me to reconsider my response to the Ombudsman’s first recommendation on the basis that maladministration had occurred. I have undertaken my reconsideration on that basis. As a result of that reconsideration we have made this extended FAS package available for all those who suffered losses as a result of their employer’s insolvency, and have considered it appropriate to set the assistance at the same level as the protection offered in compliance with the ECJ judgment.
This announcement is not affected by our appeal against one of the High Court’s decisions in the Ombudsman case. That appeal has been mounted because the judgement raises important legal and constitutional issues, in particular on the relationship between the Ombudsman and the Government, and those issues need to be resolved. This extension to FAS will stand, regardless of the result of our appeal against the finding of maladministration.
The extended scheme will now provide assistance to ensure that the pensions of all members of affected pension schemes are topped up to 80 per cent of the core pension rights accrued in their scheme.
We will more than double the cap on assistance payments to £26,000, and in recognition of the significant difference that £10 a week can make to some pensioners, we will end the de minimis rule that excludes those whose FAS payment would be £10 or less a week. Although FAS payments commence at age 65, they will remain ‘inflation proof’ up to age 65.
In total an estimated 100,000 will benefit from this extension. 85,000 scheme members will be eligible for assistance for the first time. Around 15,000 people who stood to benefit from FAS under the current scheme will receive more assistance due to the extension.
As a result we expect that all the estimated 125,000 people with losses will be helped. This increases the taxpayer’s commitment from £2.3bn in cumulative cash terms, to £8bn. This equates to more than doubling the scheme in present value terms, from £830m to £1.9bn.
Having now settled the public expenditure support for these schemes, I have today set up a review to:
- examine how we make best use of the assets in pension schemes that are winding up under funded with an insolvent employer;
- determine if these sources of funding could be used to increase assistance for affected scheme members;
- consider any suggestions from interested and concerned parties.
The review will be conducted by the Department for Work and Pensions and advised by a panel of technical experts. Due to the complexity of the issues involved the review will be informed by advice from the Government Actuary Department. This will commence immediately and the review will report by the end of the year.
Let me be clear that the 80% level of support we have committed is from the taxpayer, and it is not contingent on the release of any other funding source.
Regardless of the review, it continues to be important to the interests of all members of affected pension scheme that schemes are wound up as quickly as possible. Should the review identify an alternative way of using scheme assets we will ensure that no scheme members lose out because their pension scheme has completed the wind up process.
It is also important that trustees continue to apply on behalf of members to the Financial Assistance Scheme for payments and provide member data. Failure to do so will mean that people who could be receiving payments will lose out on the substantial help that is now available."
A ministerial statement from the Minister for Pensions Reform, James Purnell
27 February 2007
"I have received representations from trustees of a small number of pension schemes who are in negotiation with employers in relation to insolvency and qualification for the Financial Assistance Scheme that they would like some further time to complete this process.
I therefore intend to extend the cut-off date for insolvency events to 31 August 2007. I will bring forward appropriate amendments in due course. In the meantime I will not give effect to the current cut-off date and I will consider whether any further extension beyond 31 August 2007 may be required."
Financial Assistance Scheme (Miscellaneous Amendments) regulations laid in Parliament
The Government has laid the Financial
Assistance Scheme (Miscellaneous Amendments) regulations 2006 (137KB) before
Parliament. The regulations which, amongst other things, bring into force
the extension to the FAS announced in May's white paper 'Security in
Retirement' are expected to come into force by the end of the year (subject
to parliamentary approval). The Government published the draft regulations
for consultation in July and our
response can be found here (58KB) . We
are grateful to all those who found time to contribute.
Minister presents findings of the Review of the Administration of the Financial Assistance Scheme to Parliament
On the 6 June the Minister of State for Pensions Reform, James Purnell, announced details of the review of the administration of the Financial Assistance Scheme (FAS) and said it would report by the end of July.
The review looked at what can be done to provide the best administration and management for the Scheme to ensure all eligible people receive payments as quickly as possible. The review also considered how to ensure the most cost effective operation of the Scheme and a full range of options for its organisational location. The review did not look at the rationale for the Scheme, the way in which it is funded or designed or any other legislative issues.
The Minister of State for Pensions Reform informed Parliament of the outcome
of the review (118KB) on
24th July. Key findings include:
- A different skill set and a revised approach to gathering data on scheme members is required to speed up payments;
- These skills exist in the private sector and the Pensions Protection Fund. Outsourcing, however, is not a viable option and we are examining options to inject skills into operations in the shortest time;
- The length of the wind-up process and competing trustee priorities are significant constraints to making more FAS payments;
- A detailed work analysis is required to critically review job roles, examine process timings and establish optimum staffing levels for the FAS Operational Unit;
- The long term governance of the FAS is best placed within The Pension Service.
Financial Assistance Scheme Annual Report Published
The Secretary of State for Work and Pensions, acting in his capacity as
Scheme Manager of the Financial Assistance Scheme, has laid the Scheme’s
first annual report before parliament. The annual report covers the period
from 1 September 2005 (when the Scheme opened for business) to the 31 March
2006. Read the report (36KB)
The Minister for Pension Reform has also written to MPs giving details of the planned review of the administration of the Financial Assistance Scheme which was announced by the Secretary of State on 25 May 2006. The review will look at options for providing the best administration and management support to ensure all eligible people receive payments as quickly as possible. The review will report before the end of July. Trustees should continue to deal with the FAS Operational Unit as normal.
Government announces extension to Financial Assistance Scheme
As part of the Government's white paper, "Security in Retirement: towards a new pension system", we have announced that we intend to extend eligibility for the Financial Assistance Scheme (FAS) to members of qualifying pension schemes who were within 15 years of their scheme pension age on 14 May 2004. FAS
will now help around 40,000 people who have lost their pension because their scheme wound under-funded and their employer was unable to make up the shortfall.
Members who were up to 7 years from their scheme pension age will be considered for a top-up to around 80% of their expected pension. Those between 7 and 15 years from scheme pension age who can most reasonably be expected to supplement their retirement income will be considered for a top-up to around 65% of their expected pension if they are between 7 and 11 years from scheme pension age, and 50% between 12 and 15 years.
This means that all eligible members with scheme pension ages of 65 who reach age 65 up to May 2019 will be considered for assistance, whilst those with scheme pension ages of 60 will be considered up to 2024.
The full white paper can be accessed at www.dwp.gov.uk/pensionsreform.
We will publish regulations to effect the changes as soon as possible and consult on them over the summer. We hope that the changes will come into force in the late autumn ensuring that everyone who is eligible and reaches 65 over the next few years is able to access assistance where appropriate. If you wish to be involved in the consultation process please write to us at FAS Consultation, DWP, 3rd Floor Adelphi, 1- 11 John Adam Street, London, WC2N 6HT.