The funding review, proposed during the Commons debate on the Pensions Bill (see our April 2007 Update) is now underway.
The review will consider whether compensation for members of pension schemes that have wound up underfunded could be supplemented from alternative sources. The Government has already extended the compensation available under the Financial Assistance Scheme (FAS) (see our March 2007 Update) to 80% of the members’ core pension expectation, up to £26,000. The review will look into ways of making better use of the assets of schemes in winding up and obtaining other non-public funding.
For the first time, FAS compensation will be made available to members of schemes with solvent employers, that is, schemes that began winding up between 1 January 1997 and 5 April 2005, where a compromise agreement is in place, provided that payment of the employer debt would have forced the company into insolvency. This will affect an estimated 8,000 people.
An initial view will be available in the summer and a full report will be published by the end of 2007.