Ministers sink ‘pensions life boat’
Ministers have defeated a Conservative-led amendment to the pension bill, rejecting calls to guarantee more financial help to people whose occupational pension schemes have collapsed.
The government defeated the cross-party amendment by 22 votes, after pensions minister James Purnell made concessions to expand the Financial Assistance Scheme (FSA).
The FSA will now cover 8,000 more savers, including those whose schemes wound up between January 1st 1997 and April 5th 2005.
Leading cross-party calls to expand the FSA, the Conservatives had proposed a £600 million “lifeboat fund” to top-up benefits to 90 per cent of the expected pension package, to be funded by a Treasury loan.
However, ministers rejected the idea on the grounds of cost. “The government should not write a blank cheque but organise a remedy,” Mr Purnell argued.
Speaking earlier in prime minister’s questions, Tony Blair insisted it would be “cruel” to reassure savers the government could bail them out if it could not afford to do so.
The extent of government help will be dependent on the review of unclaimed assets funds, Mr Blair said, and the government cannot commit itself to any packages until it knows they are affordable.
“We cannot make an additional commitment unless we are sure the finances are there to finance it,” he told MPs.
The Conservatives, however, warned pensioners face “devastation” after ministers voted down the “pensions lifeboat”.
Shadow work and pensions secretary Phillip Hammond accused the government of “missing the opportunity” to build a cross-party solution to the pensions crisis.
“The pensions lifeboat would have greatly helped those who have lost their pensions,” he argued. “Now Gordon Brown and his crew have sunk it.”
In last month’s Budget, the chancellor committed to expanding the FSA to help 125,000 savers. Funding is set to increase from £2 billion to £8 billion.
MPs are expected to pass the remainder of the pensions bill. If successful, it will raise the state pension age to 68 by 2046 and restore the link between earnings and the basic state pension by 2012.
