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The Actuary The magazine of the Institute & Faculty of Actuaries
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Playing political football

W ith the general election looming, it is
high time that our politicians on both
sides of the House stopped treating the Financial Assistance Scheme (FAS) as a political football.
As readers will know from Ros Altmann’s article in the August 2004 issue of The Actuary, the FAS was announced in great haste last spring primarily to avert a backbench revolt by Labour MPs on an entirely different topic. After much debate, the enabling clauses are now enshrined in legislation, but the basic fact remains that the £400m so far promised by the government (£20m a year for 20 years) is nowhere near enough to provide adequate compensation to all the 85,000 or so scheme members who have been so cruelly deprived of their pensions.
At the further pensions summit held at Westminster on 21 March, Ros Altmann presented strong arguments to MPs as to why the members affected should get compensation, and not just assistance. As we now know, the yearly hand-out of £20m has already been spent on supporting (partially) only the first 15,000 members who are within three years of age 65. The fate of all the other 70,000 members therefore remains unknown and will depend entirely on the ‘review’ in 2008 promised by pensions minister Malcolm Wicks or, even more disingenuously, on support being forthcoming from the ‘pensions industry’!
This lack of commitment is a particularly cruel way of handling such a large human problem. The circumstances really merit a proper basis of compensation, perhaps adopting the benefit scale set for the new Pension Protection Fund (PPF). Rough estimates indicate that the cost of PPF-scale compensation would be about £5bn, which could reasonably be spread at £75m a year for 40 years. In case the comparison is not obvious, £75m a year represents only 1.5% (sic) of the £5,000m (£5bn) of tax being taken out of pension funds each year since 1997 following Labour’s change to Advanced Corporation Tax (ACT.
This fact has been well recognised by a number of Labour MPs, in particular Sandra Osborne, MP for Ayr, location of UEF, one of the collapsed pension schemes. She therefore tabled a comprehensive early day motion (EDM 40) see box on 23 November 2004, which called for the government ‘to rectify this injustice and restore confidence in pensions’ and moreover to do so ‘as soon as possible and in advance of a general election’.
Now, given the degree of supportive rhetoric from the other political parties, one might have expected this issue to transcend party politics. Not so, however, as the Conservatives response was instead to table their own EDM 199, a mere two days later, making a similar plea, but asking the government ‘to consider using unclaimed assets to boost the funds available’. Yet, this seemingly trivial distinction has caused the whole process to stall, as will be seen from the evidently partisan support for each party’s own EDM (see table 1). The LibDems have been constant supporters of compensation, while Labour backbenchers can hardly be blamed, with the real culprits on the lack of unity being the Conservatives.
When I publicly challenged Tory spokesman Nigel Waterson MP on this at the March summit, he replied that they had intended to get their EDM tabled ahead of the Labour one! which looks all too much like the proverbial political football. Yet one might have thought that Tory support for a Labour back-bench revolt could even have given the Tories political advantage, through backing a socially worthwhile proposal on an important national issue being fudged by the Labour government.
Another issue referred to in the August 2004 article was the legal case then being assembled for consideration by the parliamentary ombudsman. This complaint of maladministration against four public bodies (DWP, Opra, NICO, and the Treasury) is now progressing well, so much so that the parliamentary investigation manager announced on 21 March that they expected to complete the investigation prior to the parliamentary recess, probably in early July 2005.
It is important to appreciate that the parliamentary ombudsman’s general approach to redress is ‘to put people back into the position they would have been in had any maladministration not occurred and, where appropriate, to recommend additional compensation to recognise the distress or inconvenience caused’. So, if the parliamentary ombudsman finds in favour of the complaint lodged by Ros Altmann on behalf of the Pensions Action Group, the cost of any such full compensation could significantly exceed the PPF-scale compensation referred to earlier.
The government would also do well to remember that the Pensions Commission has still to issue its final report, in which restoring public confidence in pensions will be a priority. Furthermore, the prospect of the potentially much higher cost (than FAS) and political backlash of an adverse ruling by the parliamentary ombudsman will probably not be lost on a Labour government anxious to achieve a third term in office. It may therefore not be entirely wishful thinking on my part to surmise that the government may yet decide to play an astute political card by announcing, just before the election, the award of PPF-scale compensation under the FAS.
Not only would this rectify a major social injustice, and help to restore public confidence in pensions, but it might even win over my vote!

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