Pension funds are handed £2.5m bill

Britain's hard-pressed company pension schemes were landed with a new bill yesterday when they were ordered to pay £2.5m between them to bail out workers at a firm whose pension fund allegedly had millions of pounds dishonestly removed from it.

The Pensions Compensation Board, which was set up after the Robert Maxwell scandal, has taken the rare step of asking every occupational pension scheme in Britain to pay a levy of 23p per member.

The board pays compensation to people when money has been dishonestly removed from a company pension scheme and the employer is insolvent. It has £1.9m in the kitty but is expecting to make a payout that will exceed this. If it had not asked schemes to put their hands in their pockets it would have had to take out an overdraft.

The timing of the cash call is unfortunate for ministers, because it coincides with demands for the government to compensate workers whose pensions have been snatched away after their firms went bust. It also comes at a time of intense debate about the costs facing pension schemes.

These will rise still further with the arrival next year of a new compensation scheme that will protect millions of members of final salary schemes if their employer goes to the wall.

The £2.5m is needed to fund a payment to pensioners of a Birmingham lock-making firm, CW Cheney & Son, which went into liquidation in 2001.

The loss in the Cheney pension fund has been estimated at about £2.9m, said a spokesman for the Pensions Compensation Board, which has already paid out a six-figure sum to the company's former employees because there was not enough money to pay their pensions.

This is the first time since 1997 that the board has ordered pension schemes to pay a compensation levy.

But the board revealed that even this extra cash will not fully cover all the pensions due to workers at the Birmingham-based firm.

The board can only compensate for assets that were removed from the scheme, and it is understood the Cheney pension scheme was in deficit before the removal of assets.