11 March 2008 - First solvent schemes taken in to FAS

Around 4,000 people who lost savings when their pension schemes were wound up by solvent companies will be potentially eligible for financial help from a Government scheme.

Mike O’Brien, Minister for Pensions Reform, has announced the first six pension schemes backed by solvent employers to be admitted into the Financial Assistance Scheme (FAS). The FAS tops up the pensions of people belonging to schemes wound-up under-funded. But, previously, all schemes eligible for the FAS had been sponsored by companies which went bust.

The companies are building materials supplier Expamet, whose pension scheme has 1,233 members based mainly in the Hartlepool area; Fredk H Burgess, a Shrewsbury based agricultural machinery retailer with outlets nationally and scheme members in Staffordshire, Shropshire, Derbyshire and Nottinghamshire  (1,128 members); car battery maker Lucas Yuasa, which formerly had a factory in Sparkhill, Birmingham, with pension scheme members in that area (747 members); Dragon Cosmetics, in Maesteg Mid-Glamorgan (450 members); industrial textile manufacturer J & D Wilkie, in Kirriemuir, Angus (366 members); and Norman Butcher, an insurance company based in Bromley, Kent (140 members).

Mike O’Brien said:

“It’s very worrying for people when their final salary pension winds up under-funded and they don’t know how much of their pension they will receive.

“In rarer cases this can happen where the company continues trading, so I'm pleased that these six schemes have now qualified for the FAS – guaranteeing them a significant proportion of the pension they had worked hard for, broadly comparable to compensation paid by the Pensions Protection Fund (PPF).

“We have just published regulations to extend the FAS to allow people to receive 90 per cent of their pension from their normal scheme retirement age. And later this year we intend to bring forward legislation to admit more schemes with solvent employers into the FAS.”

The next step is for the FAS operational unit to work with the trustees of the six schemes to obtain information as quickly as possible on members who may be potentially eligible for payment to enable the FAS unit to make assessments and start making payments.

The Government announced in December, last year, that up to 140,000 people who lost their pensions would be eligible for FAS help. Regulations to increase FAS payments to 90 per cent, payable from normal scheme retirement age (subject to a lower age limit of 60) were published last week. A shorter, two-week written consultation period has been agreed with opposition parties and stakeholders in order to fast-track the regulations. The FAS unit should be in a position to start making payments at 90 per cent of accrued pension from the end of May.

Notes to Editors

1. The six newly-qualified schemes are schemes with ‘compromise agreements’ - where the trustees of an under-funded pension scheme agreed to accept less money for the pension scheme than the debt owed by the employer to the scheme. Such agreements are typically reached to avoid driving the employer into insolvency, which would not be in the best interests of pension scheme members.
2. The Government last year announced that schemes with compromise agreements would be eligible for FAS assistance. Regulations allowing this came into force in December 2007. 
3. The Government announced, at the end of last year, that further schemes with solvent employers - other than just those with compromise agreements - would be admitted to the scheme. Legislation will be brought forward as quickly as possible to give effect to this.
4. At the end of February, this year, 4790 members were being paid FAS assistance. A further 761 members will be paid once personal details required to make payments have been received and confirmed.
5. For more information go to www.dwp.gov.uk/other-specialists/financial-assistance-scheme/

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