pensions redux; Britain

[Eubulides <paraconsistent@xxxxxxxxxxx>]

Pensions insurance attacked

Scrupulous companies to foot bill for negligent rivals

Rupert Jones and Phillip Inman
Thursday February 12, 2004
The Guardian

The government is today likely to face the wrath of employers' groups,
trade unions and opposition politicians over its measure aimed at
protecting company pension scheme members if their employer goes bust.

Today sees the publication of the pensions bill - the government's
response to the crisis in retirement saving - and ministers are likely to
confirm that a crucial element of the safety net they are planning has in
effect been put on ice for the time being.

Andrew Smith, the work and pensions secretary, will give more details
about the new "pensions protection fund", a compensation scheme which will
protect millions of members of final salary company schemes if their
employer goes bankrupt.

The fund, similar to an American scheme, will guarantee that people who
have already retired will receive 100% of their pension while those still
working will receive 90%. This will be paid for by a levy imposed on all
companies that offer final salary pensions and is aimed at ending what the
government says is the scandal of workers being denied pensions built up
over many years.

Under the original plans, companies at greater risk of going bust would
have had to pay more than employers with well-funded schemes. But devising
a levy that would work in this way has proved tricky, and the department
for work and pensions is today set to announce that it will be starting
off with a flat-rate levy where all firms pay the same.

The pensions protection fund was controversial, even before this latest
apparent backtracking, and critics were quick to attack the plan
yesterday, saying that well-run companies should not have to bail out
irresponsible employers in this way.

Steve Webb MP, the Liberal Democrat work and pensions spokesman, said the
pensions bill was "half baked". He said: "The pensions protection fund is
an insurance scheme not based on risk. It's like asking a careful driver
to pay the same as a boy racer. To ask all companies to pay the same
punishes the good guys."

It is understood the department of work and pensions decided to put off
imposing a risk-based levy on occupational schemes after advice that the
complex arrangements could delay the rescue scheme's start in 2005.

The department yesterday insisted that a levy based on risk was still
"absolutely fundamental" to the protection fund, but it appears it could
be a few years before this system is fully up and running.

It seems certain that the department has rejected trade union calls for
the new rules to be applied retrospectively. That means they will not help
the tens of thousands of workers who have lost some or all of their
occupational pension after their companies went bust.

Workers from failed steel firm ASW and other defunct companies intend to
keep up the pressure on the government by staging a protest at the Royal
Courts of Justice.