30 June 2004 - Insolvent pension wind-ups - new research into numbers affected
New research into the number of people affected by pension schemes winding up, underfunded and with insolvent employers was published today by the Department for Work and Pensions. The Government has been concerned that some individuals have suffered a great deal, so in May it announced a £400 million Financial Assistance Scheme (FAS). This research will inform the development of the FAS.
The research suggests that 65,000 people have lost significantly and by over 20% of their expected pension benefits from under-funded schemes wound-up by insolvent employers.
Secretary of State for Work and Pensions, Andrew Smith, said:
“The new scheme aims to help those workers who through no fault of their own have lost a sizable amount of their own pension. I have met with a number of people who have experienced terrible anxiety as a result and it is these people I want to help. This research takes us another step along the road to doing exactly that.”
The extensive data gathering exercise, the largest yet undertaken, was conducted to assess the extent of the problem. Data was collected from some 250 final salary schemes. From this, DWP analysts and the Government Actuarial Department (GAD) have been able to estimate that 65,000 members are facing significant losses of 20% or more of their pension and within that:
- 60,000 have losses of 30% or more;
- 50,000 have losses of 40% or more;
- and 35,000 have losses of 50% or more.
Andrew Smith added:
“For the future our new Pension Protection Fund will provide cover to ensure that even where a firm goes bust employees can still be sure they’ll get a worthwhile pension. The £400 million scheme for those who have already lost out is another step that will help to boost confidence in occupational pensions and I hope industry will play its part in that by making a contribution to the scheme. We hope to have the legislative framework of the scheme in place by spring of next year and making payments as soon as it's practical.”
Minister of State for Pensions Malcolm Wicks, outlined the future timetable for the FAS, saying:
“We have been able to put this work together through a close co-operation with trustees and other stakeholders. With the information gathered, we will be working across the coming months with the pensions industry, unions and the business community to put details together on how the FAS is going to work, how much help we can provide to people and how we get that help to them.”
For people who wish to be kept up to date with the latest developments of the Financial Assistance Scheme, they can register for email updates at http://www.dwp.gov.uk/lifeevent/penret/fas.asp.
Notes for editors
- Plans for the Financial Assistance Scheme were first announced on 14th May 2004 and details can be found at: www.dwp.gov.uk/mediacentre/pressreleases/2004/may/pens140504-400m.asp
- DWP conducted a data gathering exercise with pension industry representatives to assess the full extent of the problem of schemes winding up, underfunded and with an insolvent employer. Information on some 250 defined benefits and hybrid schemes were obtained.
- Estimates of the total number of non-pensioner members in these schemes took into account the fact that the start date for the FSA is likely to be 6th April 1997 as the date when several provisions of the 1995 Pensions Act came into force
- The Pensions Bill was published on February 12 2004 and is available at: www.publications.parliament.uk/pa/cm200304/cmbills/096/2004096.htm
- The Pensions Bill contains measures such as the Pension Protection Fund, taking your Basic State Pension in a Lump Sum and promoting pension and retirement provision in the work place. Further details can be found at: www.dwp.gov.uk/mediacentre/pressreleases/2004/feb/pensbill_120204.asp
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