A Pension Scandal Worse Than Maxwell
140,000 people have been affected by this shameful, cruel scandal. News that it's been resolved is welcome, but very late.
There has been a great victory for the 140,000 workers whose pension schemes went bust between 1997 and 2005. After a ten-year scandal, where they have been deceived and left with no or little money, they are finally getting some help. But how much help? Let's look at the background first.
It all started with a broken promise
Over ten years ago, the Government told millions of workers that their pensions were 100% safe. So if your employer or former employer went bust, your pension would be safe.
Then, from 1997 to 2005, as various companies, whose pension schemes were covered by the Government's promise, went bust, the Government's guarantee of safety turned out to be little more than words.
As a result of the failure of these schemes, many long-serving older workers lost their entire pensions. They saved for decades, believing, as the Government told them, that their savings were safe and protected by the law. Many are now past retirement age and have received no help or payment. Some have been forced to continue to work despite failing health while others have already died without receiving their pensions.
These people have been fighting hard for a proper rescue, particularly since some big company schemes went under five years ago. Along the way they've been aided by the tireless Dr. Ros Altmann, an independent policy advisor, who recently, and correctly, described this whole tragic situation as '...the worst pension scandal the UK has ever seen -- far worse than Maxwell'.
Campaigning vigorously, Altmann showed that the compensation scheme for these people, called the Financial Assistance Scheme (FAS), was letting them down. She showed how the Government was using spin, rather than helping them, saying recently: 'Gordon Brown promised billions of pounds of assistance, but the truth is that the FAS has failed to deliver. It has so far only paid out around £11million to about 3,000 people and cost £10million to administer'.
A little more money would fix it
What's even more shocking, though, is Altmann had shown that at relatively little extra cost to the taxpayer, these pensioners could be saved completely. All the Government needed to do was use more effectively the pot of money already in the compensation scheme.
The FAS has been using its fund to buy annuities (a pension income for life) in the same way that we all do, with our pension pots, when we retire. However, Altmann showed that if the money in the scheme was used to just pay the pension incomes, rather than to buy annuities, it would get a lot more value for money and save all 140,000 pensioners.
80% of 25% is...not a lot!
Following a pensioners' naked protest to highlight that they were stripped of their pensions, politicians continued to use spin and did nothing to help. They announced that the scheme members would have 80% of their pensions restored. The reality was entirely different. Thousands of people were still excluded from the FAS.
What's more, the FAS paid just 80% of what the Government called 'core' pension. It is nothing like the full pension they should have got. For all we know, for some people it was just 25% of their total pension - and 80% of 25% isn't a great deal. So it was playing with numbers.
A shameful, cruel betrayal
It gets even worse. The Parliamentary Ombudsman found that the Government misled these workers about the safety of their pensions and must properly compensate those affected. Yet the Government did nothing.
It didn't stop there. The Public Administration Committee, a High Court Judicial Review and the European Court of Justice each took turns to lay the blame for the situation squarely on the Government and said that the Financial Assistance Scheme is inadequate. Ros Altmann described it as 'the most shameful, cruel betrayal of hard-working, decent citizens'.
Compare and contrast
Now, let's take a look at what pensioners have got if their schemes collapsed after April 2005. These pensioners are looked after by the Pension Protection Fund (PPF), not the FAS. They get 90% of their pensions. (No, really! It's 90% of 100%, this time.)
They also get index-linking, which means their pension incomes go up each year to help fight inflation. Furthermore, they get paid in much more reasonable time. Those are just three examples of how much better the PPF is. Why is it that those workers whose schemes failed just a year earlier deserve so much less?
Finally, a result!
Out yesterday was a new report from the FAS. It found that a proper rescue is easily affordable if it stops buying annuities, just like Altmann has been saying.
Following the report, The Government announced that all 140,000 pensioners (or should-be-pensioners) will now receive 90%. Just like the PPF, this time it really means 90%. That's 90% of 100%.
Sadly, many of the other terms of the payout are still worse than the PPF. Also it is not the total rescue that the Government promise ten years ago had led workers to expect. However, it's as good as they could have hoped for.
They owe Ros Altmann a big thank you for her awesome campaigning, and for her part in the past few weeks in dealing with the Department of Work and Pensions. No doubt she will continue to pressure the Government into beginning the new payouts swiftly.
The cost according to spin
How much will this rescue cost? The Government needs to add £935m to the FAS pot, apparently. And so, we end on more of what I believe to be spin. Yes, it might need around that much, but this won't be one generous lump sum. It's likely to be, say, £50m a year over the next ten to twenty years. Decent compensation has been denied to these people for so long over a mere £50m or so a year.
Ah well, let's not get political, eh? Here's to what should now be a very merry Christmas for the victims!
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