Page last updated at 19:10 GMT, Wednesday, 6 June 2007 20:10 UK

Lords vote to lift pension payout

Protesting members of the Pensions Action Group
Members of the Pensions Action Group protesting in London

The government has failed to stop the House of Lords voting to increase the compensation given to some people whose company pension schemes have collapsed.

By a majority of 55, the Lords have introduced an amendment to the Pensions Bill calling for higher payouts from the Financial Assistance Scheme (FAS).

The FAS was set up to compensate people who lost out when their pension schemes collapsed between 1997 and 2005.

The amendment is likely to be removed when the bill returns to the Commons.

Commons clash

Under the Lords' plans for a "lifeboat fund" for the FAS, its compensation would be increased to match the more recent Pension Protection Fund (PPF).

Earlier on Friday, Prime Minister Tony Blair and Opposition Leader David Cameron clashed over the issue at Prime Minister's Question Time.

Mr Cameron said it was imperative that the innocent victims of pension scheme collapses received more compensation.

But Mr Blair replied that it would be "delusional" and "irresponsible" to promise pensioners additional benefits without being sure there was the money to pay for them.

In this year's Budget, the Government extended the scope of the FAS so that all 125,000 affected pension scheme members would be eligible to receive 80% of their "core" benefits, and increased its funding from 2bn to 8bn.

However the PPF - which provides compensation for people whose pension schemes went bust since 2005 - pays out at a higher 90% level to those who have yet to retire.

'Miserable' payouts

Liberal Democrat peer Lord Oakeshott described the FAS as "miserable."

"It has only paid out 4m so far, although 125,000 people have been robbed of their pensions," he said.

In April, a similar amendment was defeated in the House of Commons by 22 votes.

Ros Altmann, a spokeswoman for the Pensions Action Group, said it was the responsibility of the Government to improve the FAS further.

"The government said it had put in place laws which would make employer pension schemes completely safe and ensure that the employer had put enough money in to fund the pensions," she said.

"The Government knew those laws wouldn't work but it kept pretending to the members of the schemes that the money was completely safe."

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