Financial Assistance Scheme, 2008 –

The Pensions Act 2004 established a Pension Protection Fund (PPF) which provides compensation for members of final salary occupational pension schemes which, from 6 April 2005, commence winding up under-funded on the insolvency of the employer. The Pensions Act 2004 also established a separate scheme – the Financial Assistance Scheme (FAS) – to provide some compensation to members of schemes that started to wind up between 1 January 1997 and the date the PPF commenced operations (6 April 2005).

From its inception, the FAS was criticised for providing less generous support than the PPF. However, significant extensions to the FAS have been announced on three occasions. The Government said that the third extension, announced in December 2007, would result in “assistance under the FAS being broadly comparable to compensation paid under the PPF.” The fourth and final set of regulations to implement these changes was laid before Parliament on 3 February 2010. The Joint Committee on Statutory Instruments has drawn these draft regulations to the special attention of both Houses as making “an unexpected use” of the enabling power conferred by the 2004 Act.

This note covers the FAS from the beginning of 2008. The background is covered in more detail in SN/BT/2010 Financial Assistance Scheme – developments to 2007 and SN/BT/3330 Financial Assistance Scheme: background 2004. The PPF is covered in SN/BT/3917: Pension Protection Fund.

NB. THIS NOTE WAS LAST UPDATED ON 22 MARCH 2010.