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Working Lunch Wednesday, 5 March, 2003, 12:22 GMT
Workers face pension ban
Worker with empty pot
Many employees are seeing their pensions diminish
Workers could be banned from pulling out of their company pension schemes.

The move is a temporary measure aimed at preventing some occupational schemes from heading into meltdown.

Because so many pension schemes have been hit by the fall in the stock market, members have been looking to bail out and put their money elsewhere.

They have realised that although the fund has fallen, the transfer values have not been updated so they would get a good deal if they acted quickly.

But the authorities are worried that having to pay these people off would be detrimental to those staying in the schemes.

Valuation

Now the government watchdog, the Occupational Pensions Regulatory Authority (Opra) has told scheme trustees they can delay giving members a valuation of their pension rights.

Without this, people cannot transfer their money, either into another occupational scheme or a personal pension.

Funds will not be able to stop people leaving indefinitely.

Calculate

This measure will stay in place until the Department for Work and Pensions issues new guidelines on how to calculate the money paid out to people changing pension schemes.

Des Hamilton, Pensions Advisory Service
Des Hamilton: "Employers should make up shortfall"
It could be that, like with personal pensions, members will be charged an exit penalty if they want to leave early.

"We would hope that trustees will continue to quote transfer values," says Des Hamilton of the Pensions Advisory Service, "and if there's a shortfall they should first turn to the employer and ask the employer to make good that shortfall."

A report published on Tuesday by investment bank Dresdner Kleinwort Wasserstein said the UK's top 100 companies could have a combined pension shortfall of 100bn.

Earlier this week Rolls-Royce revealed a pension fund deficit of about 1.1bn.

And many companies have been moving away from final salary schemes - which cost them more - to money purchase pensions.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Simon Gompertz
"Some of these schemes are like ships foundering at sea"
Des Hamilton, Pensions Advisory Service
"The solvency status of schemes has changed quite dramatically"
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