Government proposals protect employees' pension rights
11 June 2003
The government has unveiled new plans to overhaul the pensions system, including a pensions protection fund to protect workers whose pension schemes face closure.
Speaking in the House of Commons today, work and pensions secretary Andrew Smith said he plans to change the current 'debt on the employer' legislation to prevent stop companies walking away from pension promises made to employers.
The compulsory insurance scheme will be funded by employers and will ensure workers receive their pensions if the fund goes under.
The new plans also include proposals to force solvent employers who choose to wind-up solvent employee pension schemes to pay out compensation in full.
However, future pensioners now face smaller returns on their savings, following significant drops in the stock market.
Pension funds are still billions of pounds in deficit and many have been wound up leaving thousands of workers with little to show for years of saving.
Mr Smith announced that a new pensions regulator would be set up to oversee occupational schemes.
Solvent schemes that fold will be forced to honour their debts, while pension schemes will also have to take out insurance to protect 90 per cent of current workers' pensions and the full value of retired members.
However, the cost of insurance will be passed onto employers, many of whom are hesitant to back the scheme.
The government has announced that it plans to reduce the requirement on schemes to raise the pension of retired members by 5 per cent a year, instead firms will be required to increase retired members income by 2.5 per cent each year.
The issue of pensions has been a thorny one for the government. Hundreds have had savings wiped out because of loopholes and stock market falls and Britons are currently saving an estimated £27 billion less a year than is needed for a comfortable retirement.