THE Government today announced a new pensions safety net system to ensure people do not lose out if their company and its pension fund go bust.
The move was hailed as a “big step forward” by the Cabinet minister responsible, Andrew Smith.
The Pension Protection Fund will require company pension funds to pay into a special insurance scheme. Then if a pension fund goes bust, at least 90 per cent of the workers’ entitlement will be paid out of a government fund. But the move will not be retrospective.
But Work and Pensions Secretary Mr Smith promised the Government will be looking at what can be done to help some 60,000 employees who have been left without pension provision when their company and their superannuation fund went into liquidation.
Some 200 companies have gone bust in these circumstances in the last few years and, while people already retired are protected, people still working for the companies get nothing.
Mr Smith said the Pension Protection Fund would end that problem in the future.
He said that for the first year there would be a reduced flat rate levy to get the scheme up and running. Over the first 12 months the solvency, number of members, funding provision and risks of each fund would be assessed.
They would then be given a rating and asked to pay an appropriate fee in future reflecting that assessment. This would ensure dodgy funds were not being subsidised by better ones.
The aim is to try to increase people’s confidence in retirement saving, which has been damaged by scandals over the mis-selling of private pensions, the collapse of several pension funds and companies ending final salary schemes in favour of cheaper schemes linked to stock market performance.
A new pension regulator will be set up under the Bill to ensure the new rules are followed and to combat pension fraud.
The Bill will also contain details of the plan to reward people who put off claiming their state pension. It is currently estimated that Britons are saving GBP 27 billion less than they need in order to have a comfortable retirement. A Government source said: “This Bill shows the government is tackling the UK pension crisis. It will increase people’s confidence in retirement saving and provide a safety net when occupational pension schemes go bust.
“It will also make it simpler and cheaper for companies to provide good pension schemes for their staff, which is good for workers and good for the firms.”
Malcolm McLean, chief executive of the Pensions Advisory Service, said: “It is crucial that the Pensions Bill reassures scheme members that their life savings are not at risk. People must feel they will get back what they paid in.”
Mr Smith promised to meet representatives who had lost their pension entitlement when their companies and funds had gone bust.
He said: “No insurance scheme can be retrospective but the Government is looking to see what it can do to help these people.”
Last May, 150 members of staff at Edinburgh engineering firm Blyth & Blyth lost their entire pensions, despite saving for decades, after the company went into receivership in January 2003 with a GBP 6m hole in its final salary pension fund.
And, although the South Gyle-based company was later bought out of receivership, the new company, Blyth & Blyth Consulting Engineers Ltd, said it had no responsibility for the old pension scheme.
