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Is Brown pulling a FAS one?

Paul McMillan says the Chancellor’s pledge to boost the Financial Assistance Scheme has had a distinctly lukewarm reception.

The Chancellor claims the 6bn increase in Financial Assistance Scheme funding will help all the victims of final-salary scheme collapses but campaigners suggest this is more spin from a mean-spirited Government.

In his final Budget speech, designed to shore up backbench support, Gordon Brown pledged to extend FAS funding from 2bn to 8bn.

He said the move would help all 125,000 people who “through no fault of their own” lost savings when their employer became insolvent. The phrase contrasts sharply with the dogmatic approach taken by the Government since Parliamentary Ombudsman Ann Abraham’s damning report into its failings last year.

What thoughts were going through the mind of Work and Pensions Secretary John Hutton, who stared passively as the announcement was made? Hutton has spent the last year trying to defend the Government’s indefensible stance against a barrage of criticism, including being hauled in front of the public administration select committee and constantly saying the Government had no more money to help the victims.

The 8bn figure that Brown says will help all the victims also raises eyebrows when set alongside the scaremongering 15bn figure that Tony Blair announced to Parliament would be needed when Abraham’s report was published.

Brown has finally opened the coffers, after considerable pressure from within his own party as well as the opposition benches but pension campaigner Ros Altmann says it is not enough.

Altmann says the news that everyone will be entitled to help is welcome, as is the raising of the annual cap to 26,000 and the removal of the de minimis rule which previously excluded those who would receive 10 a week or less.

But she says the new measures will not help those who are suffering now, as only 900 pensioners have received help out of 10,000 who should be receiving money from the scheme.
Since the FAS was set up in September 2005, it has paid out only 3m. Complaints have been made about bureaucracy and the time it takes for people to receive payment.

In an answer to a Parliamentary question in February, pensions minister James Purnell admitted it takes an average 190 days for people to receive their first payment.
Altmann calculates that, under the new proposals, victims will receive a maximum of 60 per cent of their pensions, with many receiving far less.

She says the FAS still only pays out at 65, so those who should have retired at 60 will lose five years of potential contributions.

The benefits are not index-linked, there is no ability to take a tax-free lump sum and the FAS excludes the schemes of solvent employers.

Altmann says there is a political consensus around paying all the victims at least up to the level of benefits they would receive from the Pension Protection Fund, which is 90 per cent of the pension up to a maximum of 25,000 dependent on age, with some inflation-linking.

Earlier this year, 188 MPs signed an early day motion calling on the Government to offer a fair and sustainable level of support to all victims.

Altmann says despite celebrations in some quarters following the announcement, MPs must continue to argue for further concessions. She says: “The fight goes on. MPs will be asked to support amendments to the Pensions Bill to force the Chancellor to address this issue fairly and properly.”

LibDem Shadow Work and Pensions Secretary David Laws has branded the proposals “half measures from a Government which is having to be dragged kicking and screaming towards a fair solution”.

Laws says: “Meanwhile, vulnerable people are being kept in poverty and forced to wait years for compensation. The only way pensions justice will be delivered is if MPs impose a decent package on ministers.”

When the current Pensions Bill returns to the Commons, Laws will put forward amendments to allow MPs a chance to vote on upgrading the compensation package.

Conservative Shadow Work and Pensions Secretary Philip Hammond also strongly criticises the moves which he says will do little to help those in retirement who have so far received nothing.

Hammond says: “To help those most in need, the Government should urgently consider setting up a lifeboat fund using unclaimed pension assets. This would help increase FAS benefits without further cost to the taxpayer. We have also called on the Government to look at making better use of the assets in failed pension schemes which could be used to top up this lifeboat fund.”

Brown also announced that Hutton will lead an investigation into the assets left within affected schemes to see if these can be used to support those affected.

The Government continues to battle against the recent judicial review which found it partially guilty of misleading four workers about the security of their pensions.

Extra funding for the FAS can only be seen as some kind of admission that the Government has acted improperly over the affair, is still unwilling to accept the ruling and worried about the implications of the judge’s decision that it should abide by the ombudsman’s decision unless new evidence is found.

Altmann says the Government must offer a proper admission as part of its package of help for victims to ensure that confidence in long-term saving can be restored. She says: “It has refused to admit that it is actually responsible for what has happened here. Meanwhile, those affected are suffering and dying in destitution when they saved all their lives for a pension they were assured the Government had protected.”

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