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Pension rescue scheme criticised as inadequate

A pension rescue scheme set up by the Government to help people in collapsed final-salary schemes has been criticised as being inadequate.

Under the Financial Assistance Scheme, eligible workers in failed DB schemes within three years of their pension age on May 14, 2004 will get 80 per cent of their pension. The money will be paid as a top-up pension rather than through an annuity.

The scheme is designed to help workers whose final-salary schemes collapsed too early to be eligible for help under the new Pension Protection Fund, which comes into effect from April 2005.

Pensions minister Malcolm Wicks says this assistance will benefit those hardest hit by company liquidations, as they have little chance to restart funding for a pension.

The Department for Work and Pensions has published a list of 380 eligible schemes although it stresses the list is not exclusive.

Tory Shadow pension minister Nigel Waterson says the Government is trying to seem generous but the FAS will be severely stretched.

The FAS has been allocated 400m over the next 20 years but this is thought unlikely to provide adequate assistance to the estimated 65,000 people affected by company liquidations before the Pension Protection Fund comes into effect.

Hargreaves Lansdown head of pensions research Tom McPhail says people’s lives have been blighted and although assistance is welcome, it has taken too long to appear and could see workers who fall just outside the deadline left out.

McPhail says: “The uncomfortable reality is the money available from the Government is not enough. What about those who miss out completely or have their payments compromised?”

Wicks says: “We urgently needed to give these people peace of mind by making their position clear.”

Waterson says: “This has been a deeply cynical exercise, with the timing designed to protect the Government from embarrassment in the run-up to a general election.”

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