FAS members still waiting for pensions justice

It was discovered that there was a £21mn black hole in the AWS scheme, meaning these workers had not only lost their livelihoods, but the pension they had been saving into for many years. 

Following a BBC Panorama programme and other media interest highlighting the plight of the former ASW members, the Pensions Action Group was formed to campaign for some form of redress for members of schemes, like ASW, whose employer had failed.

In 2006, the Parliamentary and Health Service Ombudsman’s report “Trusting in the pensions promise” blamed government maladministration, poor member communications, and the weakness of the minimum funding requirement for the lack of security within the schemes. 

The lack of the original scheme indexation paid for over their working lives is causing devastation to the financial retirement positions of the 140,000 members of FAS, their families and any remaining spouses

There followed a High Court case confirming maladministration by the government. Further cases in 2006-07 in the European Court of Justice found that the UK government had failed to provide protection as required by Article 8 of the ECJ.

The government moved to put a safety net in place for members of eligible schemes who lost their pension because their employer went bust between January 1 1997 and April 5 2005, or who reached an agreement so they were no longer required to pay the debt to the pension scheme.

Where are FAS members now?

The PAG has been involved in an extensive number of consultation meetings with the Pension Protection Fund and the Department for Work and Pensions, and we continue to work with the excellent administration team at the PPF.

The trouble members have is that the legislation restricts inflation protection to only a member’s pensionable service after 1997. This is now having a disastrous effect on Financial Assistance Scheme members, many of whom are in their seventies and eighties, because they have lost their pre-1997 indexation.

As each year passes, many new members of the PPF will have accrued significant post-1997 service increases, but as most FAS schemes closed in 2000, their members do not benefit.

Here is a brief example to illustrate just how damaging the lack of indexation can be. Actual figures will vary member by member, as will the length of their pre- and post-1997 pensionable service – and it may seem rather generous because the average FAS award is around £4,000 a year.

The danger of losing indexation

This example is of an anonymous ASW member who reached normal retirement date in 2004, with an expected pension of £15,013 a year with up to 5 per cent a year retail price index indexation on the whole amount.

Once they had been admitted into the FAS, their award was just 90 per cent of this – £13,512 a year – with a maximum 2.5 per cent a year consumer price index indexation on post-1997 pensionable service (seven years), and zero per cent indexation of pre-1997 pensionable service (25 years).

If all service inflation protection was calculated at the original scheme rate using RPI and CPI – the DWP switched to CPI in 2004 in order “to simplify calculations across government” – the member’s pension would now be £29,581.

The annual loss to this member is £16,069, or 54 per cent, and is increasing every year.

For some reason that has never been satisfactorily explained to the PAG, the guaranteed minimum pension increases from being contracted out between 1988 and 1997 have also been lost in both the FAS and the PPF.

A war of attrition

Our primary concern at the PAG now is the lack of pre-1997 pensionable service indexation within the FAS. For the past six years, pensions ministers have refused to even discuss our many constructive suggestions with us.

Though it only affects a small number, the DWP is refusing to pay interest on any back payments derived from the ECJ’s Hampshire ruling on 50 per cent minimum uplifts, as it does within the PPF.

We have suggested ways to resolve this at very little cost, with the support of the Work and Pensions Committee. However, meetings with the pensions minister have been refused, where we have even received the courtesy of a reply.

Members of the FAS are workers who did the right thing and saved for their retirement. They listened to – and trusted – government pledges about the security of their pension savings and have been left high and dry when their schemes folded.

Life is hard enough during this period of high inflation. But the lack of the original scheme indexation paid for over their working lives is causing devastation to the financial retirement positions of the 140,000 members of FAS, their families and any remaining spouses.

The government has stepped in to fully protect other occupational pension schemes at risk. Staff at the large banks across the UK that failed in 2008 all had their final salary pensions fully inflation-proofed by the government.

Yet, more than a generation on, we are still waiting for our pensions justice.

Terry Monk is a member of the Pensions Action Group, a former director of ITS, and a former member of the Bradstock Group Scheme, which transferred into the FAS in 2013