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Last Updated: Monday, 2 July 2007, 12:26 GMT 13:26 UK
10m pension scheme cost attacked
Pensions protest march
Thousands of people across the UK have lost their pensions
A scheme set up to assist workers who lost pensions when companies went bust has cost twice as much to run as it has so far paid out, an MP has claimed.

Cardiff Central MP Jenny Willott said the Financial Assistance Scheme (FAS) had cost 10m but had paid just 4.35m.

The plight of steelworkers in Cardiff firm ASW contributed to the decision to set up the FAS in 2004.

The Department for Work and Pensions (DWP) said significant costs in setting up the FAS had been inevitable.

The FAS is the official rescue net for pension schemes which collapsed between January 1997 and April 2005.

Another body, the Pension Protection Scheme will cover members of pension schemes that have gone under since then.

Liberal Democrat MP Jenny Willott said that over three years the FAS had paid out 4.35m to 1,166 members, including 31 former ASW staff.

But running costs amounted to 9.91m, which included administration, IT and legal fees.

FAS was an entirely new scheme which meant there was inevitably going to be significant costs in setting up the operation
DWP spokesperson

She told BBC Radio Wales: "We knew that the FAS was spending a huge amount on administration, but I have to say I was taken aback by quite what the difference is.

"It's now been three years, and that should be plenty long enough for it to be operating without all these huge admin costs.

Ms Willott said the Pension Protection Scheme was a "better model".

She claimed that the FAS paid out about 60% of the money people had expected from their pension savings.

"If a pension scheme collapses today, people can guarantee to see 90% of the pension they saved for," she said.

"People who lost their pensions before 2003 are being treated differently from people who lost their pensions afterwards and that's what we think is unfair.

Ms Willott called on Work and Pensions Secretary Peter Hain "to ensure that pensions justice is finally done" when the Pensions Bill returns to the House of Commons in the next few weeks.

Rising totals

A Department for Work and Pension spokesperson said the first FAS payments had been made at the end of 2005 and released slightly different figures than those from Ms Willott.

"We have now paid out more than 4.93m to 1,293 people and these totals will continue to rise," added the spokesperson.

"FAS was an entirely new scheme which meant there was inevitably going to be significant costs in setting up the operation."

The spokesperson said it was expected that running costs would reduce from the current estimate of 3m-4m a year.

"Balanced against this, by 2015/16 FAS is expected to be paying over 100m a year to qualifying members and their survivors."




SEE ALSO
Hain becomes pensions secretary
29 Jun 07 |  Business
Ministers win fight over pensions
18 Apr 07 |  UK Politics
PM rejects further pension help
18 Apr 07 |  UK Politics

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