The DWP has issued a consultation on changes to the FAS as outlined in its December 2007 announcement (see that month’s Pensions Update).

There are no changes to the scheme qualification requirements. Proposed changes to the payment of assistance include:

  • Indexation of post-97 benefits
  • Extension of survivors’ rights to non-married partners where the scheme rules allow this and a nomination has been made
  • Dependants’ benefits for children
  • Transitional arrangements to freeze existing benefits (the "protected amount") until new benefits catch up
  • Annual revaluation of the cap.

Although changes over the last couple of years have brought FAS assistance nearer to the PPF level, there will still be differences including:

  • No early payment of benefits other than limited right on ill health (PPF allows reduced benefits from 50)
  • Different application of the cap - PPF applies its cap before the 90% reduction, FAS applies it afterwards.

The DWP is also considering some issues in relation to the future transfer of FAS scheme assets to the government, including allowing lump sums of up to 25% to be taken and protecting members of schemes which have sufficient assets to secure more than 90% benefits for some members, as they may be worse off on a transfer into the FAS.

The consultation also covers the future management of FAS, including a proposal that the PPF becomes the FAS "scheme manager".

There will be a further consultation on a proposal that all FAS schemes transfer their residual DB assets to the government and for all payments to be made from government funds (currently FAS tops up scheme payments). It is intended there will be a moratorium on transfers out and winding-up lump sums in the period leading up to the new legislation to protect assets.