The amendment would have introduced an emergency loan to a lifeboat fund to ensure Financial Assistance Scheme payouts for those who lost out before the Pension Protection Fund was set up were increased and received more quickly. This would then be paid for through better use of scheme assets and using unclaimed assets.
The Government defeated the amendment in Parliament yesterday by a majority of 50- 303 votes to 253- after pensions minister Mike O’Brien announced payouts would rise through a combination of making better use of the assets remaining in pension schemes and further Government contributions.
A similar amendment was narrowly defeated in the Commons in April by a majority of 22 but was reinstated by the Lords.
O’Brien said the Government would match any additional funding identified by the recent Assets Review, led by Andrew Young of the Government Actuary’s Department, to increase payouts towards 90 per cent of expected core pension.
The review reported there are £1.7bn of assets in occupational pension schemes that qualify for FAS help and the current practice of each scheme purchasing annuities for their members, which are then topped up by the Government, may not be the best use of assets.
O’Brien said the Government hopes schemes will now stop expending scheme assets on annuities and called on trustees to cooperate to get a better outcome for scheme members.
O’Brien said: “We will need the cooperation of every pension scheme to get there. We are committing today to match the extra funds that the review identifies with a goal of moving towards 90 per cent of expected core pension for all recipients.
“Those extra funds will be based on the amount of assets remaining in schemes. Trustees must continue to act in their members’ best interests, but we hope they will now take the view that those interests may not be served by expending scheme assets on annuities.
“The Government will match the extra funds that the Young Review identifies as and when these are released by trustees – and we expect this to be achieved as quickly as possible.”