conservative pension compensation plans criticised as uncosted by building society trade body
Conservative proposals to use unclaimed assets in bank and building society accounts to compensate people disadvantaged by pension scheme insolvencies are uncosted policies, according to the Building Societies Association (BSA)
The BSA said that, based on initial studies, it estimates there is about £33m held in unclaimed accounts within the building society sector, a fraction of the £15bn often quoted in the press and by politicians.
This £33m figure is based on the Irish model, under which assets are designated unclaimed if an account has not been accessed for 15 years.
Adrian Coles, director general of the BSA, said that as building societies are mutual organisations, the money is collectively used for all the members to fund mortgages and higher rates for savings accounts.
He added: "At no point have we been consulted by the Conservative Party about this policy and we dispute the figures involved. We also strongly question the right of any organisation, government or otherwise, to take money from building society members. It is not clear whether, under existing legislation, the money could be legally transferred out of a building society to a third party and there has been no analysis of how much this would cost ordinary members."
Most importantly, he said to promise pensioners compensation on the basis of an uncosted policy proposal is misleading and unfair.
Addressing the Conservative party conference in Bournemouth on 6 October, shadow work and pensions secretary David Willets said this unclaimed money would help the 60,000 people who have lost out from pension schemes winding up with insufficient assets to pay benefits.
He said: "These people were told their pensions were safe and the money was guaranteed but they weren't and it wasn't. We cannot rebuild confidence in pensions of the future unless we tackle this injustice today."
The BSA currently runs a free scheme for people wishing to trace dormant building society accounts, with similar operations also offered by the British Bankers' Association and National Savings & Investments. At its annual conference, the Tory party also announced plans to restore the link between the state pension and earnings, the gradual phasing out of pension credit and the ending of compulsory annuity purchases by the age of 75.
Conservative leader Michael Howard has promised to raise the pension for single pensioners by £7 a week and for couples by £11 a week.
The full basic state pension is given to men with 44 years of National Insurance payments for men and women with 39 years. For 2004/05, this meant £79.60 to a single person and £127.25 for a pensioner couple
The Tories want to abolish the means-tested minimum income guarantee, which tops up incomes to £105.45 for single people and £160.95 for couples.
The Opposition also wants to scrap rules stopping employers telling their staff about the benefits of joining a pension scheme.
Currently, employers are hindered by the fact encouragement may constitute giving financial advice.
The Tory announcement came a week after the Labour Government revealed it was sending out Pensions Information Packs to employers informing them on how far they can go in advising their workers.