Time to compensate the pension victims in full

I hear that Labour MP, Frank Field, has tabled a private member’s bill, calling for the victims of pension scheme collapses to be compensated out of the £2.6bn of unclaimed assets held in banks and building societies.

His initiative is a timely reminder that the 85,000 victims of collapsed pension schemes are still awaiting justice.

Shockingly, only around 1,000 of these people have received any help from the Financial Assistance Scheme (FAS) to date, even though the scheme was established three years ago to provide limited compensation to those who lost their pensions between 1997 and 2005.

Even those lucky enough to be eligible for help, (because they were within 15 years of their retirement date when their scheme collapsed), are only entitled to a maximum of 80 per cent of their core pension entitlement, capped at £12,000 a year - with no indexation or spouse’s pension.

To date the Parliamentary Ombudsman, a House of Commons Select Committee report, the European Court of Justice and most recently, the High Court, have all ruled that the current level of compensation is inadequate.

But Pensions Minister, John Hutton, has steadfastly maintained that the government cannot afford to increase the Government’s funding of the FAS because it would be a drain on taxpayers’ money.

Such claims ring somewhat hollow, given that barely a day goes by without reports of taxpayers’ money being squandered through mind-boggling government incompetence, ill-judged decisions and fraud.

The £12bn lost through VAT carousel fraud in recent years, the millions wasted on failed IT projects in the NHS and other government agencies, and the £4bn annual cost of an unpopular war in Iraq, spring to mind.

This is not to mention the £2.6bn which the Department for Work and Pensions managed to lose last year through incorrect benefit payments, made as a result of ‘error and fraud,’ or the £57m it managed to shell out to dead pensioners. Yes, it could afford to pay pensions to the deceased!

Pensions expert, Dr Ros Altmann, the indefatigable campaigner on behalf of the Pensions Action Group, says that paying the victims’ pensions in full would cost the government a mere £100m a year over 50 to 60 years.

The average, full pension entitlement for these people is £3,300 a year, compared to an average payout from the FAS of £1,800 pa.

If ever there was a cause which merited the use of taxpayers’ money, this is it. Most of the pension victims have worked all their lives and have paid their tax and national insurance. Some worked for the same company for 40 years.

If the government could afford to lose £3.17 billion last year in incorrect benefit payments, it can afford to pay some, or all, of this to the thousands of individuals who have lost their pensions and who now face real hardship in retirement.

If nothing else, such a gesture by the government might go some way to restoring some much needed confidence in pensions as it prepares to establish a national pensions saving scheme (due to go live in 2012) and to which it wants some 10m currently unpensioned individuals to sign up.