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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