Amicus the Union

Amicus the Union

March 21, 2007 12:30 ET

GBP 8 billion FAS 'a major step forward to achieving pensions justice' say Unions

LONDON, UNITED KINGDOM--(CCNMatthews - March 21, 2007) - Community and Amicus trade unions have welcomed the announcement by Gordon Brown in today's Budget that the Financial Assistance Scheme (FAS) will rise to GBP 8 billion. Both unions have said it 'is a major step forward to achieving pensions justice'. Community and Amicus have fought a five year political and legal campaign on behalf of their members who lost their expected pensions when their employer became insolvent.

Commenting on the announcement, Michael Leahy, General Secretary of Community, and Derek Simpson, General Secretary of Amicus, said:

''The extension of the FAS to GBP 8 billion is a major step forward to achieving pensions justice. It has been achieved, as have all the other steps to protect employees pensions - including the establishment of the Pension Protection Fund (PPF) - as a result of the political and legal campaigning by Community and Amicus.

'However we believe that the commitment highlighted in the Budget papers means that the FAS will only pay 80% of the pension - not index-linked - which is not enough to meet the pensions justice that those affected need and deserve. Nor is it enough to comply with Article 8 of the European Insolvency Directive. In a case brought by Community and Amicus, the European Court of Justice found that successive UK Governments had acted unlawfully in not implementing the Directive properly.

'Even with the extra money announced for the FAS today, the effect of inflation must be taken into account. Otherwise, based upon past inflation experience, after 10 years the real value of a pension will fall by a third, after 20 years it will fall by half and after 30 years it will fall by three-quarters. That means a member who is 10 years from retirement, who has paid into a pension scheme for over 30 years, and has an expected pension of GBP 12,000 will receive a pension with a real value of only GBP 7,000 when they retire. 10 years later it will be worth GBP 5,000 at today's value and, should they live to 85 years of age, it will only be worth less than GBP 2,600 in real terms.

'We believe that there is widespread public and political support for the view that those who qualify for the FAS should receive the same as those that who are covered by the PPF, which provides 90% of expected pension, index linked to RPI. Julie Morgan MP has tabled an amendment to the Pensions Bill to achieve this. We believe that a Labour Government with a strong moral and social compass will want to achieve this. We call upon all MPs to support Julie Morgan's amendment'

Notes for Editors:

1. Community and Amicus issued a High Court claim on behalf of 1,000 pension scheme members of Allied Steel and Wire Ltd (ASW) from Cardiff and Sheerness who lost the bulk of their pensions when the company was declared bankrupt in 2002, leaving two pension funds in deficit.

2. Article 8 of the Insolvency Directive reads:

"Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer's undertaking or business at the date of the onset of the employer's insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors' benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes."

3. The Pension Protection Fund is an insurance scheme set up by the 2004 Pensions Act which protects 100% of pensions in payment and 90% of deferred pension payments (capped at GBP 26,000) to those whose pension scheme commenced wind up after 6th April 2005. The Financial Assistance Scheme was established in the same Act, with an initial sum of GBP 400 million, to provide support to the estimated 125,000 people whose pension schemes began wind up prior to 6th April 2005.

Contact Information

  • Ken Penton
    Community Head of Communications
    07764 570 516 or 0207 239 1243
    Catherine Bithell
    Amicus Press Office
    07958 473224