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Pension promises must be kept

Letter from Westminster - 24 May 2004

MPs have been kept busy during the past week by the Pensions Bill - the most important piece of pensions legislation for a decade.

The Government wants to ensure that occupational and personal pension provision remains a historice strength of the British system, so this Bill makes it easier for firms to get on and run good schemes, while ensuring that a pension promise is a pension delivered.

In the overwhelming majority of cases, promises made in defined benefit pension schemes are fulfilled. however, we also know of cases where workers have contributed to their pension, sometimes for forty years, only to see it vanish overnight when the company goes bust. It is this scandal that the new Pension Protection Fund seeks to address.

This compensation scheme will protect pension scheme members, giving over 10 million individuals reassurance that, should this happen, they will still receive the core of the benefits they had expected. It is a huge step forward for pension security, and has been welcomed by the CBI, the TUC and the public at large.

Those who have already lost their pension will not benefit from the Pension Protection Fund, but the Government recognises the injustice they have suffered and believes they deserve help. As a result the Government will set up a financial assistance scheme with £400m of public money that will be spread over 20 years.

Trust in pensions has taken a few knocks in recent years - trust which the Government is taking action to restore.

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