Tories call for pension lifeboat

People protesting in London about their lost pension scheme money

The Conservatives are calling for the establishment of a new "lifeboat" fund to help people who lost money when their pension schemes went bust.

It's aimed at helping those people whose pension schemes collapsed over eight years between 1997 and 2005.

They should be helped by the Financial Assistance Scheme (FAS) but the Tories say its payments are slow and too low.

The Tories are proposing to create the lifeboat fund with an amendment to the government's Pensions Bill this week.

The aim of the fund would be to top-up payments from the FAS to the level of payments offered by the more generous Pension Protection Fund (PPF).

This helps people whose pension schemes have gone under since April 2005.

Extra money

The Tories want to fund their extra lifeboat scheme by drawing on unclaimed assets held by pension schemes, and by cheap loans from the Treasury.

"This is a first step in the right direction which will help some of those worst affected," said the Shadow Work and Pensions Secretary, Philip Hammond.

"We challenge him [Gordon Brown] to back our proposal to launch a Lifeboat Fund to help the worst-hit pensioners by immediately topping up their income.

"These people need help now; they cannot afford to wait until 2009 or 2010 for a Conservative Government," he added.

The Conservatives want the new lifeboat scheme to make early payments "on account" and to have management of the FAS transferred to the PPF.

Expansion

However, a big expansion of the FAS has already been announced by the government.

In last month's Budget the chancellor Gordon Brown said its funding would soon be increased from £2bn to £8bn, albeit spread over the next 60 years.

And the scope of the scheme will be extended so that all of the people who lost all or part of their pensions between January 1997 and April 2005 will soon be eligible to claim from it.

This means the FAS will offer a financial safety net to approximately 125,000 people who were members of about 660 company pension schemes that were closed while insolvent, typically when the employer went bust.

Despite this improvement, the FAS has been criticised for operating too slowly and with conditions that are too harsh.

Several thousand people have applied for payments, but have been told they will have to wait until their former pension scheme has been completely wound up, which could take several years.