Forum Brief: Pension compensation

Tony Blair is expected to break with government precedent and offer compensation to 60,000 workers who lost their occupational pensions after their companies closed.

Forum Response: Association of Retired  and Persons Over 50

Don Steele, director of social policy for Association of Retired and Persons Over 50, said: "The decision by the government to provide assistance to the 60,000 workers who have lost occupational pensions due to company closure has been welcomed by The Association of Retired and Persons Over 50 (ARP/050).

"However both the government and the country as a whole is surrounded by growing evidence of insecurity in retirement yet we continue to be subject to policies which will increase that insecurity rather than diminish it.

"Final salary schemes, once the backbone of retirement income for more than half the British population are fast disappearing. Such defined benefit provision has been replaced by defined contribution schemes - meaning that the prospective pensioner must gamble his savings in the marketplace, with uncertain return and no support from
either employer or government (except where, as in the present instance, a
government is shamed into assisting).

"This situation will only be remedied when we have a properly funded state pension scheme paid at a basic level of 40 per cent of average earnings with a built in provision for workers to add such AVC's (Additional Voluntary Contributions) as they wish in order to increase their eventual guaranteed pension.

"Compensation for failure is, in this instance, commendable, but it is no substitute for radical and courageous thinking which will prevent growing insecurity in the future."

Forum Response: Age Concern

Gordon Lishman, director-general of Age Concern, said:  "It is vital that a decision about how to fund retrospective compensation is reached urgently. It is only fair that the 60,000 workers who have lost their pensions through no fault of their own are compensated without delay.

"The government must act soon to ensure that public faith in the pensions system is restored and people are not put off saving for their retirement.  

"We would strongly urge the government not to use the Pension Protection Fund to cover the retrospective compensation; dipping into the Fund before it's fully established will only create a safety net with holes in it from the outset.

"The government should examine all other options available for compensation, such as unclaimed assets from dormant bank accounts or pension funds.

"Once this issue is resolved, the government must turn its focus back to the Basic State Pension to ensure it is a solid foundation of retirement income, on which people can build with private and occupational schemes."