FINANCIAL DISASTER!

from going bust. The plight of former and current members at APW Electronics near Southampton has starkly illustrated the human cost of Britain's pensions crisis.

What happened will hit a nerve with anyone contributing to a final salary pension scheme because the APW case, described as a scandal by politicians and workers alike, means the same thing could easily happen to them...

STORED neatly in an anonymous office in Newcastle is a pension scheme file with the reference number 10129977.

Behind those eight digits is a story of financial heartache and betrayal for more than 1,000 people whose only fault was prudence.

They had done what successive governments have always urged - save for a comfortable retirement so they aren't left struggling to make ends meet on an annual state pension of about £4,000.

Past and present employees of American-owned APW Electronics in Hampshire did just that under final salary pension scheme 10129977, which was started in 1957 under British firm Vero.

Many, like Karen Deighton and her fiance Wayne Taylor, were looking forward to drawing an enviable, guaranteed APW pension at the age of 65.

The couple were set to receive £39,500 a year between them. But now they will only get £8,000.

Others were banking on more modest pensions, such as £16,000 or £7,000.

But collective hopes and calculations went up in smoke when the company announced it had wound up the pension scheme through the High Court because of a £55m pension black hole.

Overnight the members saw their retirement savings slashed by 80 per cent. In other words, for every £10 invested, £8 has gone down the drain.

Members were left distraught, having to rethink their lives.

Some say they face the dreadful prospect of selling their homes to pay for their twilight years.

Karen, 32, who had 11 years' worth of pension with the company at Chandler's Ford, said: "It's a kick in the teeth."

She and Wayne, 42, share a three-bedroom £140,000 house with 14-month-old daughter Shannon in Southampton.

Wayne, who earns £10,000 a year with APW as an anodiser, which involves treating metal with acids and coatings, has paid contributions for 16 years.

Those contributions were topped up with some lucrative shift work, which has since been knocked on the head.

Karen said: "I have a message to the government - they need to do something about this.

"It's all very well saying we should build for our future, but if they do not do something to secure company pensions, they will face having more of us on state pensions.

"They need to put in a clause to stop people being stitched up."

The APW controversy led local MP David Chidgey to describe APW's decision as "stark and brutal".

Fighting for justice on behalf of scheme members, he said: "It is immoral in my view that people spend 20 to 30 years investing a portion of their income, only to find out that it disappears."

What has happened at the Chandler's Ford factory is by no means rare.

The pensions watchdog, called the Pensions Ombudsman, received 56 complaints about winding-up orders in 2003-4 - equivalent to five per cent of the total 1,050 complaints received at his office.

Only last week Henlys, the bus group, left more than 2,000 workers' pensions in jeopardy after winding up its pension scheme.

In one high-profile case about 800 ASW steel workers in Cardiff lost most of their occupational pensions, as well as their jobs, when the firm collapsed in 2002.

Only one company has bucked the worrying trend - Danish-owned shipping line Mersk reinstated pensions for a British subsidiary following a publicity backlash earlier this year.

The spotlight will inevitably fall on the role of the parent company of APW Electronics in all of this, and whether it could have done anything to help its troubled British cousin.

Brian Gay, the trustee chairman, told members in an explosive letter that the cuts had been forced from across the Atlantic.

He wrote: "The company told the trustees that its ultimate parent company had said that unless the ongoing financial burden of the scheme was eliminated they would withdraw financial support of the company, which would therefore be forced into immediate insolvency proceedings."

APW Ltd, based at Pewaukee, Wisconsin, has 30 manufacturing bases as far apart as China, South America, India and Europe, making enclosures for electronic equipment for the telecommunications and defence sectors.

It is in effect owned by a £13.2 billion investment firm called Oaktree Capital, based in Los Angeles.

Oaktree injected tens of millions of dollars of investment after APW Ltd hit the financial buffers in May 2002.

However, despite being told that the APW pensions scandal was now a political hot potato at Westminster, a spokesman at APW Ltd repeatedly met the Daily Echo's questions with stony silence.

He would only say: "We certainly know what's going on. I do not think there is much else to say."

APW A TEST OF GOVERNMENT'S SINCERITY by MP David Chidgey:

EVERYONE contributing to occupational pension schemes will be shocked by the news that employees at APW, formerly Vero, have had their forecast pension benefits slashed to only one fifth.

For APW workers close to retirement, the immediate future is bleak and prospects for relief in the medium term uncertain.

I make no bones about it. Employees who have diligently saved in a pension scheme, year in, year out, have a moral right to expect the promise of a financially secure retirement kept.

It is a salutary fact that, since the late 1990s, at least two-thirds of private sector pension schemes based on number of years' service and final salary have been closed to new members.

And you have to go back many years more to find a new scheme start-up.

The reasons for the dramatic decline in employer support for final salary schemes, leading to the collapse of scores of schemes across the country, has for the most part be laid at the door of governments, past and present.

In 1987 controls introduced on pension fund surpluses by Margaret Thatcher's government encouraged employers to take contributions holidays in a stock market "boom", thus removing a safety net against a future "bust". Then in 1997, Gordon Brown set about abolishing tax credits on dividends paid to pension funds, severely weakening their viability.

To add to fund managers' misery, in 2001, the stock market plunged rapidly, dramatically reducing the value of their investments.

The Pensions Bill, having passed into law just last week, is the government's response to the pensions crisis, but the scope of this new Act is still uncertain and in many ways limited.

We have battled for effective and adequate support where schemes fail. We have called for the new Financial Assistance Scheme to be introduced in six months, not in three years and for acceptance of expert advice to provide funds of £2 billion over the next 20 years, instead of the £400m the Treasury is insisting on.

And we have pressed for a robust Pension Protection Fund to be developed from the USA model.

The ill-fated APW pensions scheme should be a test of the government's sincerity.

As soon as I have sufficient details, I plan to present them to Minister for Pensions Malcolm Wicks and call on him to provide a detailed explanation of the assistance forthcoming to the many who now face losing so much.

HOW DID IT HAPPEN AND WHAT CAN BE DONE?

Q Why did APW Electronics at Chandler's Ford wind up the pension scheme?

A It has a £55m shortfall, and the company, struggling to manage the costs, said the business would go under unless action was taken.

Q What caused the scheme, which dates back to 1957, to be so in the red?

A Among other factors, stock market devaluation, minimum funding requirements and the fact that pensioners are living longer.

Q How did it arrange to wind up the scheme?

A It received the legal approval of the High Court after proving its financial difficulties were serious enough to warrant what it called a "compromise agreement".

Q How does it impact upon past and current members?

A There are more than 1,000, and they are all losing 80 per cent of their retirement funds.

Q What are they doing about it?

A There is talk of an action group being formed. Local MP David Chidgey is also rattling cages in Parliament.

Q What about the unions?

A Some 150 staff are represented by Amicus. It is due to meet pension fund trustees to find out if the worst affected can be helped.

Q Surely this couldn't happen to me?

A Yes, it could. Authoritative research by the National Association of Pension Funds shows that eight of ten employers with final salary pension schemes expect to face funding difficulties in the future. Worse, one in eight anticipate "severe problems".

Q What are companies doing about this?

A Many are topping up the pot themselves, or increasing contributions from staff. Others, however, are putting up the shutters - ten per cent of private-sector final salary schemes closed to new members in the past 12 months.

Q What are firms switching to?

A Many have now moved to defined contribution schemes, in which they only guarantee how much they will pay into a scheme and not what it will be worth when a worker retires.

QHow do I check out the financial health of my company's pension fund?

A Under strict disclosure rules, called the FRS 17, all companies from January 1 must state in their published accounts how the fund is doing. This should stop nasty surprises.

Q Any other way?

A Members of schemes are entitled to ask fund trustees for an actuarial valuation, which will tell them if things are rosy or not.

Q But surely the company will let me know anyhow?

A Not always. Some companies, sticking to the rule book, only give notice once every three years.

Q Are there any big names with well-publicised pension deficits?

A The Royal Mail, British Airways, British Telecom, Hampshire County Council, the BBC, British Aerospace and Rolls-Royce, to name but a few.

Q Who do I contact if I have a complaint about the way my pension scheme is run?

A Try the Pensions Advisory Service helpline, on 0845 6012 923, the Pensions Ombudsman on 0207 834 9144, or your local MP.