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Last Updated: Saturday, 13 September, 2003, 13:16 GMT 14:16 UK
New hope for past pension losses
Thousands of workers from many different companies have suffered

The Department for Work and Pensions is to consider a new proposal to help the thousands of people who lost their pensions after schemes were wound up or companies went bust.

Representatives from the Pensions Action Group - made up mainly of workers from former steel works company ASW - met the Secretary of State for Work and Pensions Andrew Smith on Tuesday to discuss the ideas.

Emerging from the meeting, campaign co-ordinator for the Pensions Action Group Andrew Parr told the BBC Radio 4's Money Box programme that Andrew Smith had been sympathetic to their ideas and said:

"There certainly seem to be a softening of the DWP's attitude."

The group of affected workers - which runs into thousands - had previously been told they would not benefit from the government's new pension protection plan, as it will not apply retrospectively.

The idea would be that we leave the assets in the scheme and pay out the pensions as they become due each week
Ros Altmann, pensions expert

The protection plan will insure future workers against suffering the same fate. But it leaves thousands of workers out in the cold, without the pensions they have paid into for years.

With two more schemes going bust in August, the pressure has been mounting on the government to take action.

Pension expert Ros Altmann who helped the group draw up the plan, was also present at the meeting. Ms Altmann explained to Money Box how the proposal would work:

"The idea would be that we do not use the fund to buy annuities but we leave the assets in the scheme and pay out the pensions as they become due each week."

She admitted the funds would run out eventually, and that when they did the government would then have to help. But Ms Altmann estimated it would be "a large number of years" before the money was used up.

Legal threat

If these people are forced to court, they will win anyway, but it will end up then costing the taxpayer a lot more money
Ros Altmann, pensions expert

The estimates are based on 20,000 people, and Ms Altmann said that from the period it would start - in around seven years time - the government would have to pay around 60m a year for a period of about 30 years.

"It is nothing really," she said, "compared to general government spending on pensions, or the 14bn of tax relief that we spend on pensions every year."

And she continued: "If these people are forced to court, they will win anyway, but it will end up then costing the taxpayer a lot more money."

Workers and their unions, have been threatening legal action because they claim the government is ignoring part of the 1980 Insolvency Directive.

Article 8 of the 1980 Employment Insolvency Directive "requires member states such as the UK Government to ensure that there are necessary measures in place to protect employees in relation to their pension rights".

An additional challenge is also being prepared on human rights grounds. Plaid Cymru MPs have joined forces with ASW to mount another test case.

They argue the government breached workers' human rights when it changed the rules in 1995 which govern the way money in a wound up pension scheme must be distributed.

BBC Radio 4's Money Box was broadcast on Saturday, 13 September, 2003 at 1204 BST.

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