Labour - For Working People and their Families

Uncle Arthur is not going to opine about yesterday's budget. However, it is important to highlight one announcement that may not be headline grabbing but is significant. The government has decided the expand the funds available to the Financial Assistance Scheme, by a considerable degree. This scheme is designed to help employees who have lost their pension entitlement as a result of scheme insolvency. The scheme was introduced after vigorous campaigning by both Amicus and Community trade unions, through political and legal channels. In 2004 the FAS was set at £400m and will now rise to £8bn.

Although much more needs to be done to expand this scheme even further, this move is most welcome and reflects where Labour's priorities should be focussed - on working people and their families.

The text below is an Amicus/Community press release on the matter.

£8 billion FAS ‘a major step forward to achieving pensions justice’ say Unions
Wednesday, 21st March 2007

Community and Amicus trade unions have welcomed the announcement by Gordon Brown in today’s Budget that the Financial Assistance Scheme (FAS) will rise to £8 billion. Both unions have said it ‘is a major step forward to achieving pensions justice’. Community and Amicus have fought a five year political and legal campaign on behalf of their members who lost their expected pensions when their employer became insolvent.

Commenting on the announcement, Michael Leahy, General Secretary of Community, and Derek Simpson, General Secretary of Amicus, said:

‘’The extension of the FAS to £8 billion is a major step forward to achieving pensions justice. It has been achieved, as have all the other steps to protect employees pensions – including the establishment of the Pension Protection Fund (PPF) – as a result of the political and legal campaigning by Community and Amicus.

'However we believe that the commitment highlighted in the Budget papers means that the FAS will only pay 80% of the pension – not index-linked – which is not enough to meet the pensions justice that those affected need and deserve. Nor is it enough to comply with Article 8 of the European Insolvency Directive. In a case brought by Community and Amicus, the European Court of Justice found that successive UK Governments had acted unlawfully in not implementing the Directive properly.

‘Even with the extra money announced for the FAS today, the effect of inflation must be taken into account. Otherwise, based upon past inflation experience, after 10 years the real value of a pension will fall by a third, after 20 years it will fall by half and after 30 years it will fall by three-quarters. That means a member who is 10 years from retirement, who has paid into a pension scheme for over 30 years, and has an expected pension of £12,000 will receive a pension with a real value of only £7,000 when they retire. 10 years later it will be worth £5,000 at today’s value and, should they live to 85 years of age, it will only be worth less than £2,600 in real terms.

‘We believe that there is widespread public and political support for the view that those who qualify for the FAS should receive the same as those that who are covered by the PPF, which provides 90% of expected pension, index linked to RPI. Julie Morgan MP has tabled an amendment to the Pensions Bill to achieve this. We believe that a Labour Government with a strong moral and social compass will want to achieve this. We call upon all MPs to support Julie Morgan’s amendment’