Opra Update 9, published yesterday, offers guidance to trustees, insurers and others involved in winding up underfunded pension schemes about the possible implications of the Financial Assistance Scheme (FAS), announced by the Government on 14 May 2004 (see Aries news item).

Opra says trustees of schemes already in wind-up should not halt or delay progress - at least, towards identifying the liabilities and member shortfalls - simply on the grounds that the details of the FAS are not yet decided. (Apart from the headline figure of £400 million to be made available over 20 years, all we have is the enabling Clause 274 of the Pensions Bill, which makes liberal use of phrases like "as may be prescribed".) The DWP has made it clear that members will not be excluded from the FAS because trustees have completed winding-up or bought out members' annuities. Members' best interests should be the paramount factor in determining the timing of buying out or annuitising, emphasises Opra. There are considerable risks in waiting for a possible top-up from the FAS.

Sponsoring employers and trustees who are currently contemplating putting an underfunded scheme into wind-up are given little help by the Opra Update. This is partly because the current expectation is that the FAS will provide help only for qualifying members of schemes which started to wind up between April 1997 and May 2004 (when the new priority order was introduced), although the Government has not yet ruled out help in respect of schemes which started to wind up before April 1997 or between May 2004 and the introduction of the Pension Protection Fund (PPF) (expected to be 6 April 2005). As the changes to the priority order will make no difference to the total sum available to pay benefits, it is surely to be hoped that the FAS will eventually cover the period up to 6.4.05. There is also a case for starting from the date of Royal Assent to the Pensions Act 1995 (19 July 1995) rather than the date that Act came into force (6 April 1997), as some employers anticipated the Act's provisions and wound up their schemes in the interim. What is clear is that whatever the FAS offers will be less than the provision offered by the PPF.

The FAS is intended to be a 'stopgap' partial solution to the problem faced by members of schemes winding-up underfunded whose sponsoring employer is unable to make up the deficit; pending commencement of the PPF under Part 2 of the Pensions Bill. As noted above, the details are still being worked out. Nothing is settled yet, including how the assistance will be delivered. On 21 July 2004, the DWP held a 'Stakeholder Consultation Event' in London, a report [PDF] of which has just been published on the web. Participants included representatives of industry bodies such as the ABI, ACA, PMI, SPC and OPAS; Government (DTI); employers (CBI, EEF); and members and beneficiaries of schemes in wind-up (eg Blyth and Blyth, Kalamazoo, UEF). A very wide range of views emerged on the four key themes:

• How the scheme might be funded
• How assistance might be provided
• Who should be eligible
• How to administer the scheme effectively

Nobody appears to have argued that the level of assistance which might be delivered by £400 million over 20 years was likely to be perceived as substantial, or even adequate. The Government was also further disabused of the rather fanciful notion that industry might voluntarily supplement these funds.