The £400 million fund is being established as u nions in the UK have been pressing the government to help the estimated 60,000 workers who lost all or part of their pensions after their employers went bust.“The severe losses that some individuals have already suffered in insolvent pension windups has caused considerable hardship,” Work and Pensions Secretary Andrew Smith said, according to a report in the UK-based publication The Guardian.
Additionally, Smith announced intentions to create a Pension Protection Fund to compensate workers whose firms go out of business in the future. The current protection fund is only being established to assist workers who have been slighted in the past.
As the fund is set up, the money will be paid in installments over 20 years, with the possibility of further contributions from industry. The fund is to be front-loaded, so that those people who have lost the most will receive the most compensation.
Smith said that details of the fund’s operation would be worked out in consultation with stakeholders, and that the government would review the operation of the fund in three years.
The potential loss of pensions is a large problem in the UK. A report published earlier this week by JPMorgan Fleming shows more than 60% of the country’s top pensions funds have closed their final salary pensions to new business (See More UK Firms Switch to DC Options ).