Workers 'left without pensions'

Final salary schemes have been affected by the stock market

Employees of a Scottish engineering firm could be left without a pension after their employer went into receivership with a massive hole in its final salary scheme.

Blyth & Blyth was taken over in a management buy-out earlier this year - but the new firm has no responsibility for the old pension scheme.

This means that 150 staff who had not retired by the time the company went into receivership stand to lose everything.

The independent trustee brought in for the scheme described the case as the "most distressing and difficult" he had ever dealt with.

Pension schemes face deficits when liabilities exceed the value of the funds.

Three years of falling stock markets have left many final salary schemes with rising deficits.

Part of the reason why Blyth & Blyth went bust was its inability to plug a £6m gap in its pension fund.

This, as far as I am aware, is the first case that has such a large hole and whereby the actual members are likely to get nothing

Andy Scott
Independent trustee

Under the current regulations any money left in the pension pot of an insolvent company must go to existing pensioners first.

Andy Scott, who has been appointed as an independent trustee of the scheme, admitted that it was something of a lottery.

"Someone who has been in the scheme for 35 years and was only one day away from retirement would not receive anything from the pension scheme," he said.

"Someone who retired one day before it got wound up would receive all the pension, but without increases."

In Blyth & Blyth's case, there may not even be enough money to pay the existing pensioners.

People felt 'cheated'

Mr Scott has asked an independent actuary to investigate how the pensions scheme was run.

He said the Blyth & Blyth case was highly unusual.

"This, as far as I am aware, is the first case that has such a large hole and whereby the actual members are likely to get nothing or the state bails them out.

Tony Blair must act to end the growing scandal of pensioner poverty and the flight from final salary pension schemes by employers

Jack Dromey
Transport & General Workers Union

"People have felt cheated, there has been one person who has retired recently and got nothing other than his own voluntary contributions.

"It has been, from an emotional point of view, easily the most distressing and difficult one that I have had to deal with."

Jack Dromey, the favourite to succeed Bill Morris as general secretary of the Transport & General Workers Union, said ministers had "failed to act to end a growing national scandal".

If elected, his first act would be to convene a summit to present a Pensions Bill to parliament for legislation in 2004.

"Tony Blair must act to end the growing scandal of pensioner poverty and the flight from final salary pension schemes by employers," he said.

'Very concerned'

"Too many bosses are paying themselves fat-cat pensions, while cutting what they offer their workers.

"Downing Street can no longer duck its responsibilities to ensure security and dignity in retirement."

Scottish Secretary Helen Liddell said the government was "very concerned" about the operation of pensions in general.

She said there was a "lot more to do" to ensure that people's pension money was protected, adding: "I think we will probably need more legislation on that."