The DWP has issued draft regulations for the extension of the Financial Assistance Scheme (FAS). Consultation ends on 9 October 2007. It was announced in the 2007 Budget that certain changes would be made to the FAS. The Pensions Act 2007 then made some changes to FAS that came into force on Royal Assent (26 July 2007). These amending regulations amend the FAS regulations to make them consistent with Pensions Act.
The key changes are:
- All members of qualifying pension schemes will receive 80 per cent of their accrued core benefits (instead of the previous tapered assistance levels linked to how far away from normal retirement age (NRA) a member was when the scheme began to wind up);
- The cap on compensation will be increased from £12,000 to £26,000;
- The de minimis rule excluding those receiving £10 or less per week will be removed;
- The FAS will be extended to cover members of schemes that began winding up between 1 January 1997 and 5 April 2005, where a compromise agreement is in place and there is evidence that enforcing the debt against the employer would have forced the employer into insolvency. Schemes in this position are encouraged to apply to the FAS without delay.
- The time period by which an employer must have an insolvency event in order for its scheme to be eligible for FAS assistance is extended indefinitely, provided that FAS is of the opinion that the insolvency event of the employer and the winding-up of the scheme were linked; and
- The description of small self-administered schemes is amended to enable some to be eligible for FAS assistance.
In addition, regulations came into force on 26 September 2007 which prevent trustees of qualifying schemes from purchasing annuities without the written permission of FAS. This prohibition applies for a 9 month period from 26 September. Trustees who have already entered into a binding commitment to purchase annuities may complete the transaction.