In what was not a widely unexpected defeat for the government, the Lords have introduced an amendment to the recent Pension Bill demanding an increase in compensation payouts to those who have suffered from the collapse of their company pension schemes. The amendment brings the Financial Assistance Scheme into line with more recent regulations promising to cover 90% of core pension entitlements against only 80% for earlier victims.
While the Lords ruling is a moral victory, in practice the amendment will be wiped off the Bill when it returns to the Commons, where the government still enjoy a useful majority. The government have chosen to ignore a raft of rulings and advice from the UK and European Courts requesting that pension victims are more generously compensated, citing financial constraints.
As yet we have seen no real change in pension legislation to protect future victims, and while the politicians continue to argue, the suffering goes on for those caught up in the situation. Campaigners have promised to take their case further, however there is little real hope of success as the government seem to have decided that they will not be increasing the compensation package.
As with so may of todayâ€™s pension problems, market observers a blaming the decision in 1997 to introduce further tax liabilities on pension scheme assets – a decision which has had a major impact on the lives of many.
Final Salary Pension Schemes Still Under Pressure
While the headlines about the state of the pension industry, and company pension schemes in particular, may have calmed down, the situation is still getting worse behind the scenes. Research has shown that 8 out of 10 final salary schemes are now closed to new members, with many members being pressurised into considering a conversion to money purchase schemes.
The news seems to confirm what has been happening on the stock market, where the billion pound takeover of Alliance Boots was dogged by problems about pension funding. It was only after the party taking over the company agreed to specific funding liabilities over the coming years that the takeover was able to go through. However, there are still some concerns that the Pension Fund Trustees may well have agreed funding at a level which may see the scheme encounter difficulties in the future.
Pension funds have become a major part of many proposed stock market takeovers, with the likes of Sainsbury under threat, only for the potential predator to drop any offer due to pension scheme funding implications. Gone are the days of the 1980s when the likes of Lord Hanson were able to raid a takeover targets pension scheme and use the surplus to fund the takeover, and expansion plans.
There are now few, if any pension funds who are now in surplus and the situation looks as though it will get worse before it gets a whole lot better.