UK says it boosts assistance for work schemes
UK – The UK government has followed up a relaxation of the terms of the Pension Protection Fund with new details about occupational schemes’ eligibility for a new financial assistance scheme.
Pensions minister Malcolm Wicks has announced new details on the eligibility requirement for occupational pension schemes seeking help from the new Financial Assistance Scheme.
An amendment tabled to the Pensions Bill will mean that under funded final salary schemes that have started winding-up prior to the establishment of the Pension Protection Fund with an insolvent employer may now be eligible for FAS assistance.
"When we announced the creation of the Financial Assistance Scheme we undertook to consider the position of schemes that fell between the date of the announcement and the start of the Pension Protection Fund,” Wicks said.
"This, together with the details on PPF eligibility we announced, will mean that help and protection will be available right up to the minute the PPF opens its doors, without the fund being retrospective.
"This is good news for hard hit individuals in those schemes that have found themselves in difficulty."
The government has also relaxed the terms of the Pension Protection Fund – although observers said the move was another “knee-jerk” reaction which could have knock-on costs.
Wicks told parliament that the government was aware that trustees of schemes whose sponsoring employers are in financial difficulty were uncertain about whether they would be eligible for PPF compensation, which launches next year.
He said: “The government are now able to state that eligible schemes, whose sponsoring employer has already entered insolvency proceedings may still be able to receive PPF compensation.”
The move met with a mixed response. "Clearly from the point of view of members of schemes potentially benefiting from this relaxation, this is good news,” said Martin Slack, senior partner at Lane Clark & Peacock. “However, any new protection has to be paid for by other occupational pension schemes, potentially forcing some of those to have to call on the PPF as well.
"This is a further example of a 'knee jerk' reaction from the government: having realised that its Financial Assistance Scheme, to be funded by tax payers, is unlikely to do much more than scratch the surface in relation to schemes already facing insolvent wind up, it is looking to transfer the cost onto other pension schemes.