28 March 2007 - Financial Assistance Scheme – review of assets
Secretary of State for Work and Pensions, John Hutton today announced a review of pension scheme assets held by insolvent employers.
The review will:
- 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.
It will report by the end of the year.
John Hutton said
“The extension of the Financial Assistance Scheme announced by the Chancellor last week represents a major increase in the support available to people whose pension schemes were wound up under funded due to employer insolvency.
“The increase means that all eligible members of affected pension schemes will get support broadly equivalent to 80 per cent of their core pension rights up to £26,000 per year.
“We think this is as much as the taxpayer should be asked to pay.
“However, several alternative methods of funding have been proposed, in particular the pooling of scheme assets from the affected schemes. Although these have already been considered, the Government has agreed to look again at this suggestion, and this is what the review will do.
“Any additional sources of funding will add to the 80 per cent already committed from public funds.”
The focus of the review will be on whether better use could be made of the remaining assets within the failed pension schemes that have qualified for Financial Assistance Scheme (FAS). There is no overlap between the scope of this review and the Government’s consultation on "A UK Unclaimed Asset Scheme: a consultation” issued 20 March 2007.
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’s Department.
Notes to editors
- The review was announced by John Hutton via Written Ministerial Statement today. A copy of the full statement is available from the DWP press office.
- This review follows the extension of the Financial Assistance Scheme announced by the Chancellor in his budget statement on 21 March 2007. This extension 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.
- The extended scheme will 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.
- The 80 per cent level of support is from the taxpayer, and it is not contingent on the release of any other funding source identified by the Review.