Pension rescue package unveiled

Secretary of State for Work and Pensions Peter Hain revealed the package alongside the publication of the Young Review - commissioned by the Government to look at ways of generating additional value from the failed pension schemes.

Young demonstrated that, if the residual assets in failed pension schemes totalling over £1.7bn were brought into Government, then it would be possible - with an additional top up - to meet the demands made by trade unions and campaigners for the workers who lost their pensions

Hain said that assistance would be increased for those affected to 90% of their accrued pension. In addition, the settlement would extend cover to 11,000 people in schemes wound up by qualifying solvent employers.

Hain said: "All those who lost their pensions had done the right thing by saving for later life. They played by the rules, only to see their pension savings disappear through no fault of their own.

"We believe this represents a just and final settlement - bringing the total commitment to £12.5bn (US$25.2bn) in cash terms or £2.9bn in Net Present Value terms."

The Financial Assistance Scheme (FAS) will be extended so that:

• All scheme members will be guaranteed 90% of their accrued pension at the date their scheme began wind-up. This will be subject to a cap of £26,000, the value of which will be protected.

• Assistance payments derived from pension accrued post-1997 will be increased each year in payment in line with inflation.

• Assistance will be paid from each failed scheme's normal retirement age, subject to a lower age limit of 60.

• People who are unable to work due to ill health will also be able to apply for early access to payments from age 60.

• Members will be able to draw a tax-free lump sum, up to their full lump sum entitlement, if their share of scheme funds allows.

• Help will be extended to members of schemes wound up by qualifying solvent employers.

Commenting, Maggie Craig, ABI's director of life and savings at the ABI, said: "Peter Hain's announcement is good news for the 125,000 people who lost their pensions. The decision to use a mixture of FAS assets and Government funding is the right way forward."

Independent pension adviser Ros Altmann, who has lobbied on behalf of the pensioners impacted, said the announcement did not address all the issues but was still good news.

She said it was the result of many years of hard work and she hoped it would restore faith in pensions.

She said: "It's a fair settlement. It's a deal on the table and it means they can now get on with their lives."

Altmann added she would continue to speak to the government about people who were seriously ill and under 60, who would not benefit from the package. She said: "I hope we can work on that."