“Will the Pensions Lifeboat finally rescue tens of thousands of Pension Scam victims who are drowning in despair?”
As we await the commencement of the Work and Pensions Committee’s inquiry into pension scams, tens of thousands of pension scam victims around the country will be wondering whether the multi-£billion Pension Protection Fund, which can provide a ‘lifeboat’ to pension savers when a fund becomes insolvent, might eventually come to their rescue.
Sustained by a levy, the Pension Protection Fund has been operating the Fraud Compensation Fund (FCF) since the Pensions Act of 2004. It was set up specifically to support pension schemes that have suffered losses through ‘acts of dishonesty.’ The Pension Protection Fund’s Annual Report shows that in 2018/19 the FCF took £5m in levies so it would seem to have the resource, responsibility and remit for taking care of pension scam victims, when it can be shown that dishonest conduct by others has played a part in their loss.
However, it is unclear how many pension scam victims have been saved by the “Pensions Lifeboat”, if any. Relating to Contingent Liabilities for possible claims on the FCF, the annual report states:
“The value of possible future claims on the FCF at 31 March 2019 was estimated at £nil (2018: £nil). We have received four applications for claims amounting to £35.4m but for which there is uncertainty as to their eligibility and to the validity of the amounts claimed. Therefore these have not been included. We are in close dialogue with trustees of a number of schemes which have potentially significant claims.
Andy Agathangelou, Founder of the Transparency Task Force commented:
“Given that the Fraud Compensation Fund advertises that its purpose is to ‘pay compensation to members of eligible work-based schemes where the employer is insolvent and whose schemes have lost out financially due to dishonesty’ it is somewhat unsatisfactory that the FCF still seems unclear about their obligations, sixteen years after Parliament took decisive action to protect the public by bolstering the robustness of the UK’s pensions system.
The most obvious questions that come to mind are:
– Why does the FCF seem unclear on who can claim what from them; and how much they might claim?
– If the FCF has helped some pension scam victims, have all trustees already considered this avenue for compensation; and if not, why not?
– If the FCF hasn’t yet helped pension scam victims, will Parliamentarians intervene to demand justice for their constituents that have suffered losses that are often life-changing?”
Pension scam victims have been “treading water” waiting for the “pensions lifeboat” to arrive. Many victims have been experiencing what could be likened to “financial and emotional hypothermia” as a consequence of what they have endured, for years on end.
The Transparency Task Force hopes that current proceedings in the Hight Court between The Board of the Pensions Protection Fund and Dalriada Trustees Limited will at last lead to the lifeboat being launched.
Inevitably there will be technical hurdles to overcome but it isn’t just scam victims that want justice – if Parliamentarians, the Department for Work and Pensions and The Pensions Regulator all focus on the strategically vital task of restoring trust in our pensions system, all technical challenges can be overcome.
Sue Flood, a pension scam victim who is a member of TTF’s Advisory Group, has been following proceedings closely.
“I know from painful personal experience that pension scam victims can go around and around in circles, struggling to find help, but rarely get it. Way back in 2004, Parliamentarians tasked the Fraud Compensation Fund to help the pension-saving public who have been cheated. I think many Parliamentarians are going to be more than a little curious as to why their scammed constituents haven’t been getting the protection that was always intended.
Can the PPF compensate all pension scam victims?
At the end of March 2019, the PPF had 249,159 members, £32 billion in assets under management and £6.1bn in reserves. Whilst the number of claims on the PPF have fallen in recent years, their total value has increased. As shown below, less than 30 new claims were made on the PPF in the 2019-2020 financial year, but they totalled more than £1.5 billion in value because they included the Kodak Pension Plan (No. 2) — with 11,000 members — the largest single claim on the lifeboat to date.
Source: Pension Protection Fund, Annual Report & Accounts 2018/19