Dear Listener

What does ‘at least 90%’ mean? Does it mean

(a) more than 90%.

(b) 90% or more.

(c) 90% or less.

Here is the context. “Thousands of people who lost pension when their employers went bust will get at least 90 per cent of their pensions guaranteed as the final phase of the Financial assistance Scheme (FAS) regulations are put before Parliament.”

So begins a Department for Work and Pensions press release of 21 January. Loyal listeners will remember the long battle to get the Financial Assistance Scheme at all. It gives a pension to people who worked for a company whose final salary pension scheme went bust between April 1997 and April 2005 when the Pension Protection Fund (PPF) was set up to protect them.

It took five years of direct action, a critical report from the Parliamentary Ombudsman, parliamentary votes, and court action before campaigners finally got the Government to boost the FAS to the same level as the PPF – that was announced in December 2008. But now all that is done and the battle pretty much won is it true that the beneficiaries of the scheme will get “at least 90% of their pensions guaranteed.”?

No. They will not. Under the rules they will in fact get a maximum of 90%. And most will get less than that for several reasons.

1. The FAS does not inflation proof the pension paid on contributions made before 1 April 1997 – pension schemes would have done.

2. Contributions after that date are only inflation proofed to a maximum of 2.5% - pensions schemes had a maximum of 5%.

3. The salary on which the pension is based is only revalued from 14 May 2004 and the revaluation is capped at 5% a year. Pension schemes had no such revaluation restrictions.

4. The pension paid is capped – this year at £29,386 for those who retire at 65, less for those who retire earlier. Pension schemes had no cap.

5. No pension can be paid before the age of 60. Some pension schemes did in some circumstances.

6. Widow’s pensions are often less than those paid in the original scheme.

Only after the pension promised has been reduced in all these ways is 90% applied and that is the pension paid. So it is 90% of less than most people would have got under their original scheme. In theory it will be possible in future for some people to get more than 90% depending on the performance of assets in the FAS fund. But the chances of its happening are very remote. And so far no-one has.

So while you might think the correct answer to our quiz is (a), for the Government it is (c) and “at least 90%” now officially means “90% or less”. Or what the rest of us might call “up to a maximum of 90%” except in remote and exceptional circumstances.

…IN MONEY BOX THIS SATURDAY

Should the Department for Work and Pensions pay benefits into accounts which charge to open them, charge for cash withdrawals, and charge each time money is paid in (and that’s not the end of the charges) all out of a weekly benefit which can be as little as £50.95 a week for someone under 25?

We perk up economic predictions by using a weather forecaster. And we ask economist and ex-member of the Bank of England’s Monetary Policy Committee Sir Alan Budd why inflation is soaring – and what the weather will do.

NEST – which really does have an egg for its symbol – will begin in 2012 – sort of. In fact it won’t be until October 2017 that the last twigs and pieces of moss are in place. (Anoraks may recall that Money Box first revealed that the start date might slip from what was then April 2012 – see http://news.bbc.co.uk/1/hi/programmes/moneybox/7163257.stm. We get an actuary to work out how much this delay will cost someone on average earnings. And if you want to know what NEST stands for it is National Workplace Pension Scheme of course.

And while we are in smug mode another Money Box story has finally been vindicated. A year ago we asked Standard Life if it would compensate 97,000 people who had been misled about the investments in its Pension Sterling Fund. ‘No’ said the insurer on air – though bit by bit it changed its mind over the next few weeks. Now the Financial Services Authority has fined it £2.45 million for publishing descriptions of the Pension Sterling Fund which failed the test of being fair, clear, and not misleading. Exactly the accusation we made a year ago. Which Standard Life denied.

There may be more there may be less but we will fill our 24 minutes as always with key topical information about money and the boxes you keep it in as you will discover when you listen on Saturday at noon, or again on Sunday at 9pm, or on the website www.bbc.co.uk/moneybox at any time. There you can also read stuff, watch videos, follow up items, download transcripts and documents, and send us stories or ideas you want us to look into. And of course Have Your Say on a topic yet to be decided. 

Best wishes,

Paul

PS Don’t forget the programme preview on Breakfast BBC 1 soon after 0845 on Saturday.

e-mail Paul Lewis