New measures, to protect workers in company pension schemes, came into force yesterday.
It brings in the Pension Protection Fund and a new Pensions Regulator to oversee occupational pensions. Both form part of the Pensions Act 2004.
The PPF will protect members of certain-defined benefit schemes, and hybrid schemes, by paying compensation if their employer becomes insolvent and the pension scheme is sufficiently underfunded.
It will be funded through charging compulsory levies on the trustees and managers of the schemes.
Members of working age should get at least 90 per cent of the pension they were due to get when they retired while retired members should get 100 per cent of their pension.
However, only members of pension schemes which are wound up from now on will be eligible.
Workers whose schemes collapsed between January 1, 1997, and April 5 may qualify for compensation from the Government's Financial Assistance Scheme.
In the Midlands, these include the likes of Birmingham-based Kalamazoo and forgings group UEF which had an operation in Bromsgrove.
But some industry experts predict the collapsed pension scheme of engineering firm Turner & Newall - which has £1.9 billion of liabilities and a £875 million deficit - will be included in the PPF, because the rules allow companies that are already technically defunct to delay winding up a pension scheme, in order for it to be eligible.
Until its collapse, Turner &
Newall formerly had factories across the Midlands.
In the last eight years, as many as 65,000 people have lost 20 per cent or more of their anticipated occupational pensions, following the collapse of companies for which they work, according to Government estimates.
More than 125 final-salary pension schemes were wound up in 2003/04.
But business leaders want assurances that firms, at risk of needing the fund should pay more, thus easing the burden on trustees of well-run and funded schemes.
Commenting on the changes, CBI director-general Sir Digby Jones said: "The CBI supports the establishment of the Pension Protection Fund, but its success will depend on recognising the likely risk of a company becoming insolvent.
"Businesses at most risk and most likely to call on the PPF should pay more. The Fund could be in trouble if a proper risk-based approach is not swiftly implemented."
Chairman of the PPF, Lawrence Churchill, said: "The Pension Protection Fund has an important role to play in the changing pension landscape and in restoring confidence in occupational pensions.
"It will, for the first time, provide a level of security for members of defined benefit and hybrid occupational pension schemes, giving them reassurance that meaningful compensation will be paid even if their employer goes bust.
"2005 is going to be a challenging year as we establish the Pension Protection Fund.
"I am confident that through working in partnership with industry, trustees and the Pensions Regulator we will rise to the challenge," he added.