MEANING OF "THE RELEVANT PENSION OBLIGATIONS". (Hansard, 26 June 1980)

§ Mr. Kenneth Clarke
I beg to move, That this House doth agree with the Lords in the said amendment.

§ Mr. Deputy Speaker (Mr. Richard Crawshaw)
With this we may take Lords amendments Nos. 67, 68, 78 and 82.

§ Mr. Clarke
These amendments are concerned with the problem of so-called 905 transfer values, which, as the House will know, arise when someone transfers from one employment to another. It is possible to carry pension entitlements from one employment to the next with a lump sum payment being made by the fund managers of the first employer's pension fund to the fund managers of the second employer's pension fund in order to carry the acquired obligations from one fund to another.
The drafting of the Bill as it left this House did not clarify all the problems that can arise in that situation. Amendments Nos. 66 and 67 arise out of an undertaking given in Committee when certain defects were pointed out in the drafting. Those amendments provide that the historical element of the transfer value paid by the British Rail or NFC pension scheme shall be treated as part of the historic pensions outgo of the scheme even though the board and the corporation were not, at the operative date, under an obligation to guarantee the payment. That means that there are certain schemes which, at the time when the historic obligations are deemed to have become historic, were not under a legal liability to make transfer payments. They have subsequently become so liable. When transfer payments are made, they reduce the Government's liability because they get rid of the emerging cost of that pension. It is right that that should be taken into account in determining the Government's future liability.
The new clause deals with block transfers—the arrangements whereby a whole section of employees are, for some reason, transferred from one business to another. The board of the successor company might wish to allow its employees to transfer in a block to new pension schemes. The new clause provides that when that happens the old schemes will receive the same support as if the people concerned had not transferred. That follows through the policy of the Bill that we are not looking for lump sum capital payments suddenly to present themselves to the taxpayer but we seek to deal with the matter on an emerging cost basis.
The arrangements are complementary to each other. In the case of individual transfers or transfers to other employers, 906 the amendments to clause 45 provide for support for the transfer of payment.