An estimated 65,000 people have been hit by pension wind-ups so far
(27/7/2004)
An estimated 65,000 people have been hit by pension wind-ups so far, the Department for Work and Pensions has said.
The new figure was published following research by the department based on 250 final salary schemes. Of the 65,000 members facing losses, 35,000 workers are facing losses of 50% or more.
The government is creating a ?400m `Financial Assistance Scheme` to compensate workers who lost their pensions when their firms went bust.
The money will be shared over 20 years, with additional funds sought from industry.
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HOW ARE PEOPLE AFFECTED?
65,000 members are facing significant losses of 20% or more of their pension and within that:
* 60,000 have losses of 30% or
more
* 50,000 have losses of 40% or
more
* 35,000 have losses of 50% or
more
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The department said it had been the most extensive attempt yet to try to quantify the problem.
Pensions Minister Malcolm Wicks said: `With the information gathered, we will be working across the coming months with the pensions industry, unions and the business community to put details together on how the FAS is going to work, how much help we can provide to people and how we get that help to them.`
This latest estimate is 5,000 more than the 60,000, previously touted.
It could add to concerns that the ?20m a year fund is far from sufficient to meet the needs of those who have lost out.
The government is currently consulting on the introduction of the scheme, which is expected to be up and running by Spring 2005, with the first payments being made `as soon as its` practical`.
T&G union recently expressed concern that the fund could amount to `peanuts` for workers who have been affected.
Others are concerned that the fund will not extend to workers who have lost out from solvent employers who have voluntarily wound-up under-funded pension schemes.
Steve Webb MP, Liberal Democrat Shadow Work and Pensions Secretary, said the figures underestimated a wider problem.
`The scale of these losses shows that the Government`s hardship fund is simply inadequate and is unable to cover everyone affected,` he said.
Additionally, it was today announced that up to 40,000 current and former workers of car parts maker Turner & Newall may lose part of their pensions after the scheme was frozen by the administrators of its parent company Federal Mogul. Employees at the firm`s piston plant in Bradford will be some of the hardest hit as they are also facing redundancy.
Eric Peacock, 53, is being made redundant but had been looking forward to making the most of his early retirement and the prospect of withdrawing his pension.
Mr Peacock has worked at Federal Mogul`s piston plant in Bradford, which makes parts for the automotive industry, for 38 years. But he will now have to wait until he is 60 or possibly 65 to withdraw his pension. Alternatively, he will be forced to transfer his savings elsewhere at a substantial loss.
`We are just lost for words. I was within 24 hours of leaving the company with a pension, a lump sum and a monthly income. Now my plans have fallen flat.`
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When you are leaving at this age...what chance have you got for another job?
Nigel Foster |
All the work in Mr Peacock`s plant is transferring to Turkey and Poland.
Nigel Foster, 51, is another employee facing redundancy. Mr Foster was also planning on withdrawing his pension but will have to wait.
He says that 80 of those being made redundant at the plant are more than 50 years old - the age at which someone can start withdrawing an occupational pension.
They are currently taking part in `running down` the factory before it closes.
Peanuts
Mr Foster says he is angry because if they had left earlier they would have been given full access to their pensions.
`When you are leaving at this age (and there are other people who are a lot older), what chance have you got for another job? You might get another job stacking shelves in supermarkets, but that`s it.`
The government announced earlier in the year that it would put aside ?400m to compensate people who have lost money from company pension schemes.
Mr Foster is doubtful of whether they will receive compensation.
`Basically, it`s peanuts,` he says.
`The ?400m that they have put aside already has to cover 65,000 people. It`s just too little too late.`
Companies are considering dumping pensions altogether and offering cash incentives to employees instead.
According to a survey by Towers Perrin, 24% of all UK companies are considering, or would consider, introducing a cash option.
The human resources consultancy said it signaled a `final stage` in employers` attitudes to their pension liabilities.
Many firms have already cut back more generous final salary pension schemes to new or existing members.
Lower cost
As many as 14% of the 186 FTSE-350 firms surveyed said they were considering, or would consider, swapping cash for pensions completely.
Final salary or so-called defined benefit schemes pay out two-thirds of final salaries at retirement, but many employers have closed them to new members and even existing employees.
Companies have replaced them with money purchase or defined contribution schemes, which are much less risky and burdensome for employers.
With this type of scheme, the final pension a worker receives varies according to the level of contribution and investment performance. The final payment is not guaranteed or underwritten by the employer.
Peter Routledge, partner at Towers Perrin, said: `If stage one was to close pensions to new hires, and stage two is to close defined benefit to existing employees, we are already seeing evidence that the final stage might simply be to replace corporate pension plans with a cash allowance and let the individuals take full responsibility for planning for an income in retirement.`
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