Draft amending FAS Regulations with explanatory notes have been laid before Parliament. These put in place various recent government announcements. The main changes are:

  • Extending coverage to schemes where the winding up of the scheme (pre-April 2005) and the insolvency of the employer are linked. For insolvencies occurring up to 1 January 2009 there will be an assumption of such a link. For insolvencies after that date, evidence of a connection will have to be provided to the FAS who will then have discretion to admit;
  • Extending coverage to schemes where the employer is not insolvent but would have been but for a compromise agreement;
  • Extending coverage to some defined benefit small self-administered schemes;
  • Increasing compensation to 80 per cent of core benefits for all members (subject to a £26,000 cap);
  • Removing the de minimis £10 per week rule;
  • Allowing the FAS to re-determine annuity rates - this is aimed at situations where trustees have secured benefits with an annuity with annual increases greater than those provided for under scheme rules in an attempt to take unfair advantage of the FAS. There was no consultation on this as it is a moral hazard provision.

It is intended that provisions will come into force before the end of this year. Schemes which previously did not qualify for FAS assistance and may now do so should make contact with FAS. Schemes already known to FAS will not need to take any steps in response to these Regulations - the improvements to compensation should be picked up automatically by FAS.