Select Committee on Treasury Written Evidence


Memorandum submitted by Frank Field MP and Derek Wyatt MP

SUMMARY AND BACKGROUND

  We believe that the first claim on the unclaimed assets of banks and building societies should be given to the victims of the wind up of occupational pension schemes.

  Frank Field originally introduced a Pensions (Winding-Up) Bill in 2002, calling for an insurance fund for those in existing occupational schemes and a levy on the unclaimed assets of banks and building societies to finance compensation for pensions victims. The Government blocked this Bill and then introduced its own, setting up the Financial Assistance Scheme, which has proved totally ineffective. On 7 March 2007 Frank Field and Derek Wyatt presented the Pensions (Unclaimed Assets) Bill, calling for a similar levy on unclaimed assets and again providing for the first claim to be given to pension victims.

  1.  The problem. There are approximately 125,000 people who have lost all or some of their occupational pensions because their schemes wound up, under-funded, between 1997 and 2005.

  2.  The response. The Government established the Financial Assistance Scheme in 2005 to offer partial compensation. It has estimated that around 40,000 people will qualify for the FAS (being within 15 years of the schemes normal retirement age) and it has committed £2.3 billion over the next twenty years to fund the scheme. This money has not been paid into a separate scheme.

  3.  FAS performance. So far, the performance of the FAS has been woefully inadequate. While it has racked up admin costs of £8.8 million, it has only paid out £3.2 million in compensation—to less than a 1,000 people.

  4.  Court ruling. The Parliamentary Ombudsman and the High Court have both found the Government culpable for maladministration in relation to occupational schemes, on the grounds that the official information issued was "sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading". The Court has directed the Government to reconsider its position with regard to full restoration of lost pensions.

  5.  Duty. Although we do not believe that taxpayers should be asked to meet demands for compensation, we do think that given the court's judgement the Government has a duty to ensure proper and full compensation for pension victims. The unclaimed assets of banks and building societies provide an ideal source for such compensation.

  6.  Value. There are estimated to be approximately £4 billion in UK unclaimed assets according to Grant Thornton, the company responsible for monitoring compliance with the 2001 Dormant Accounts Act in the Republic of Ireland.

  7.  Priority. While we agree with the idea of Sir Ronald Cohen, Chairman of the Commission on Unclaimed Assets, of establishing a Social Investment Bank, we do not believe this use of unclaimed assets should be given first priority. We estimate that an extra £1.7 billion is needed properly to compensate pension victims. This would leave considerable sums for this type of charitable purpose.

March 2007





 
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