Q&A: company pensions crises

Last Modified: 17 Dec 2007
By: Channel 4 News

The government has said thousands of workers who lost pensions when their firms went bust will receive the £1.7 billion they are owed.

Who are these pensioners?

They are the tens of thousands of workers who lost their pension payments when their companies went bust. This includes 1,000 workers who were laid off in Cardiff and Sheerness in Kent five and a half years ago when their engineering firm ASW was liquidated.

What has happened to their pension payments?

Workers at ASW and other companies which went under at this time said how they had paid into the company's pension scheme their entire working lives, only to be told there was a massive hole in the fund when the companies went bust and they would not be receiving the pension they expected.

Since they were covered by the Financial Assistance Scheme, predominantly financed by the Government, the pensioners have received some of their pension payments but this fund has not financed full payment of defunct company pension schemes.

What sort of payments can they now expect?

They are now guaranteed 90 per cent of their pensions, subject to a cap of £26,000, as well as receiving a lump sum.

Why will they now be paid all their pension payments?

Today's announcement will put these workers in line with other employees whose pensions are covered by the Pension Protection Fund, launched in 2005 and financed by a levy on companies. This means the old Financial Assistance Scheme will deliver benefits on a par with the Pension Protection Fund.

The £1.7 billion will be obtained from the residual assets of the companies' failed pension schemes plus taxpayers' money.

What kind of pressure brought about this change?

Unions including Community and Unite have been campaigning for better company pension schemes for more than five years since the closure of ASW.

The union has been in detailed discussions with the government for months since it secured the agreement of ministers for a review of the situation led by Andy Young, the government's deputy actuary.

They launched legal action against the government for publishing misleading information about the security of company pension schemes and for not doing enough to compensate workers.

Protests have regularly been held outside Labour Party conferences, with pensioners protesting in the nude to show how they have been stripped of their pensions.

A breakthrough came through for Community and Unite when they won a case against the Government in the European Court of Justice for failure to implement European law which should have protected union members at ASW and those like them.