The government is facing a second judicial review of its administering of the Financial Assistance Scheme, as evidence emerges that its real value to victims of collapsed workplace pensions is typically between a third and two-thirds of their expected pension, not the 80% claimed by ministers.
The Pensions Action Group is poised to intimate that the four pensioners who in March won a historic victory in the High Court, when a judge found the government guilty of maladministration over the FAS, are going back to court. They will claim that the government has been "irrational and illogical" in its attempt to respond to the court, and has failed to explain its actions.
Chancellor of the exchequer, Gordon Brown announced in March that all 125,000 workers who lost much of their savings when their schemes collapsed between 1997 and 2005 would now be covered by the FAS to a value of 80% of their "core pension".
As The Herald has highlighted, "core pension" has a significantly lower value than expected full pension, due to loss of inflation-proofing, widow's pension and tax-free lump sum.
Dr Ros Altmann, adviser to the action group, said: "This core' pension excludes elements that all members would have expected as an absolutely core part, but have been taken away by the new definition invented by the Department of Works and Pensions."
The government has also now extended the FAS to include schemes wound up by solvent employers . But it has now emerged that only those who entered into "compromise agreements" with trustees are included, and not employers who simply met the Minimum Funding Requirement (MFR).
Altmann commented: "The government only required the employer to put in 100% MFR and the government was in charge of the MFR all along."
The action group cites a company scheme that on paper was 104% funded under the MFR, but (pre-FAS) was paying out only 40% of expected pensions.
Now the group has prepared case studies showing that even with the FAS, a typical 65-year-old is receiving £148 a week, only 61% of the £240 a week pension he had expected.
A higher-paid worker whose earned pension was £490 a week is receiving £230 a week - only 36% but the maximum allowed. He has also had to wait until 65 to receive anything, five years after scheme retirement age, because unlike the PPF the FAS will pay nothing to men or women under 65.
That contrasts with the Pension Protection Fund, which guarantees "90% of pension" to all members of schemes wound up in the past two years, equating to over 80% of full pension, and which has already covered many large schemes.
Three years after being announced, the FAS is paying out to just 1014 people.
A series of amendments to the Pensions Bill which attracted cross-party support failed by only 22 votes last month in the Commons, but campaigners are hopeful of a reversal on the floor of the House of Lords next month, or at the bill's third reading in July.
The amendments call for payments to be made through trustees, to avoid the delays that have seen ill retirees dying waiting for the FAS, who would use scheme assets to make payments, like the PPF, rather than be forced to buy annuities.
Although Pensions Minister James Purnell has set up a "review" of this issue, to report by the end of the year, he has also now written to the trustees of all schemes eligible for the FAS urging them to press on with wind-up as quickly as possible.
Altmann's research shows that by being forced to buy annuities, schemes are having to use up between 18% and 43% more of their assets.
She said: "The real risk is that the assets will have disappeared before the review is finalised. Indeed, not just members of these schemes but all FAS members could lose out if the Government keeps urging trustees to annuitise."
Meanwhile, she added, pensioners denied proper compensation were dying before they received FAS pay-outs.
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