It is essential that the Financial Assistance Scheme (FAS) be properly funded - but unclaimed pension assets are not an appropriate tool for facilitating this, an industry body has said.

The Association of British Insurers (ABI) claims that the government should act now to establish a better system of funding for the FAS - so that affected workers who have lost their pensions are offered full protection.

But using unclaimed pension assets effectively detracts from one group of pensioners to help another, ABI asserts.

"The ABI strongly supports the proper funding of the Financial Assistance Scheme," states Stephen Haddrill, ABI director general, in response to the FAS Review of Scheme Assets interim report.

"These proposals can be acted on promptly and we hope the government will move forward quickly to address the needs of FAS pensioners."

"We are therefore pleased that the review rules out the use of orphan insurance assets, that the potential income from 'unclaimed' life and pensions policies is uncertain, and that the practical difficulties in obtaining such assets are 'substantial'."