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Last Updated: Thursday, 12 February, 2004, 14:43 GMT
Pensions protection plan unveiled
Money, calculator and documents
Workers have been losing pensions when their employers go bust
Measures aimed at tackling the UK pension crisis have been published by the government.

The Pensions Bill includes a pensions protection fund to guarantee workers' retirement savings.

Employers operating pension schemes will have to pay into the fund, which will compensate workers if their company pension scheme is wound up.

In addition, a pension regulator will be set up to ensure new rules are followed and to combat fraud.

The bill, introduced by the Department for Work & Pensions, is the latest stage in government plans to restore confidence in UK pensions.

Proposals include:

  • Giving older people nearing retirement incentives to postpone drawing their state pension
  • Setting up an online retirement planning service to help individuals find out how much their state, private and occupational pensions are worth
  • Ensuring that when firms are taken over the new owners are duty bound to fulfil earlier pension promises made to workers
  • Trimming the requirement on final salary pension schemes to raise incomes of retired members by 5% a year - to 2.5%
And a new pension regulator is planned to ensure that employers keep their promises over pensions.

The new pension regulator will replace the Occupational Pensions Regulatory Authority (OPRA).

The 10 million or more members of occupational pension schemes will get their pension when they retire even if their company goes bust
Andrew Smith, Pensions Minister

It is intended that the regulator will ditch bureaucratic check-lists in favour of a more proactive and preventative approach.

Confidence in UK pensions has been severely shaken by the winding-up of up to 200 employee pension schemes over the past few years.

Under the 1995 Pensions Act, retired workers enjoy first call on the available funds when a scheme is wound up.

As a result, after a lifetime's contributions a scheme member of working age can be left with very little, through no fault of their own.

Andrew Smith, the pensions minister, said the pension protection fund should prevent workers losing their pensions in future.

"It is a form of insurance really which will ensure that the 10 million or more members of occupational pension schemes will be able to know that they will get their pension when they retire even if their company goes bust," he said.

Today's workers are destined to be in a worse position when they retire than today's pensioners...
Rodney Bickerstaffe
National Pensioners Convention

However, the fund will not compensate workers who have already lost out.

"Like any insurance policy you can't really make it retrospective to cover people before it came in," Mr Smith said.

Dr Ros Altmann, a pensions expert and governor of the London School of Economics, told BBC News Online that the fight for workers' compensation would continue.

"Many backbench MPs have constituents who have lost their pensions. I expect that MPs will propose amendments to the Pension Bill to allow compensation to be paid."

"People invested in pensions the belief that their money was safe - without compensation confidence in the whole system will not be restored."

The BBC's Jenny Scott
"Under the plans the 40,000 who have already lost out will probably get nothing"

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