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Financial Assistance Scheme


The Pensions Act 2004 included provisions for the setting up of the Financial Assistance Scheme (FAS). The purpose of the FAS is to assist individuals who have lost pension rights because they were members of underfunded pension schemes.

There have been a number of improvements since the FAS went live.  The rules detailed here are those that came into affect from 4 June 2008.

To be eligible for assistance, an individual must be a member of an underfunded pension scheme, which has met the FAS' qualifying conditions. These are:

  • The scheme started to wind up between 1 January 1997 and 5 April 2005; and
  • The sponsoring employer has had an insolvency event before 28 February 2006 (although there is discretion for the FAS to also cover schemes with solvent employers).

 

Compensation is paid to a member when they reach their scheme’s normal retirement age (NRA).  A member can apply for payment earlier (but not before age 60) on the grounds of ill health, with the compensation reduced for early payment.

Compensation is paid in the form of a top-up.  The top-up is aimed to provide the member with 90% of the pension they were expecting receive from the scheme at their NRA.

Any compensation accrued in respect of scheme service after 6 April 1997 will be increased each year in payment in line with inflation (capped at 2.5% a year).

In all cases, there is a cap of £26,000 a year to the amount that the FAS will top up to.

The FAS has published a document detailing how tax will be applied to awards that are backdated.  Click here to read that document.

Q & As

How do I know if my scheme has been notified to the FAS?

A full list of schemes that have been accepted by the FAS, and those which have not been accepted, can be viewed online at www.dwp.gov.uk/lifeevent/penret/penreform/fas.

Alternatively, contact details for the FAS are:

Financial Assistance Scheme
PO Box 702
York
YO32 9XR

Telephone: 0845 6019941

My scheme is not on the list, of notified schemes, what can I do?

Members can also notify the FAS about their schemes and it's also possible for the notification deadline to be extended, as long as there is good cause for the late notification.

Will I get an award?

To be a qualifying member, the FAS must have accepted your scheme.  In addition, the scheme must have insufficient funds to provide you with your full pension.  The FAS will then ensure you receive 90% of the pension you were expecting to receive at your NRA.

How much will the award be?

Assistance is provided by way of a top-up to your scheme pension.  If you qualify, you receive a top up to 90% of the pension you were expecting to receive at your NRA.

In all cases, there is a cap of £26,000 a year to the amount that the FAS will top up to.

When will an award be paid?

Awards from the FAS begin from a member's NRA.  If you have already passed your NRS, you will receive a backdated award.

Can awards be paid earlier if I am in ill health?

The FAS is able to pay compensation before your NRA (but not before age 60) if you are unable to work because of ill health.  Any compensation paid early is subject to an actuarial reduction.

If your life expectancy is less than 6 months, the FAS can also pay a one-off lump sum in lieu of compensation.

Will my dependants be eligible?

If you die before your eligibility for an award has been assessed, the FAS will still carry out the assessment in the normal way. Any award then calculated will be backdated to the date it would otherwise have been paid and is payable as a lump sum to your estate. If you have an eligible dependant, they will be entitled to future awards at the survivor rate.

How much is the survivor rate?

Spouses and registered civil partners will be eligible to awards of 50% of a member's award in the event of their death. Payment would begin from the date of the member's death.

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