HC Deb 13 January 2003 vol 397 cc398-400
8. Mr. John Bercow (Buckingham)

If he will make a statement on the Government's policy towards the minimum funding requirement for pensions. [89707]

The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)

Our Green Paper on working and saving for retirement sets out proposals for replacing the minimum funding requirement with scheme-specific requirements that will allow schemes to chose investment strategies more appropriate for their own particular circumstances.

Mr. Bercow

I am grateful to the Minister for her helpful reply. Given the widespread and justified concern about companies which, in choosing to wind up their final salary schemes, universally renege on their pensions obligations to their staff, can the hon. Lady tell the House and me whether, under the new arrangements, companies will be better or worse placed than under preceding arrangements to keep their pension promises to their employees?

Maria Eagle

First, I welcome the hon. Gentleman to the Back Benches—the last time that we jousted in the House he was in a different place. Since he moved, I have found that I agree with more and more of what he says. For example, I agreed with him the other morning when he said on television that the Tory party's chances of winning the next election are about as great as finding an Eskimo in the desert.

I have a lot of sympathy with what the hon. Gentleman has just said—he is referring more than anything else to the Maersk situation. Certainly, what that company has done is currently lawful, although we would probably both agree that it is pretty disreputable behaviour by any standards. The Green Paper includes proposals to share out scheme assets more fairly on wind-up and to strengthen protection for members of pension schemes caught in such situations. Pension provision will work into the future only if all parties can trust other parties to keep their pension promises. I look forward to hearing my hon. Friend's response, and perhaps that of some of his constituents, to the consultation on the Green Paper.

Mr. Bill Olner (Nuneaton)

My hon. Friend will know that the trade union movement has made specific demands for the Government to protect workers' pensions. Far too many companies have got away with pension holidays and are now reneging on final salary payments. It really is time for the Government to get tough on employers who scandalously expose their workers to poverty when they retire.

Maria Eagle

I strongly agree. My hon. Friend will have noted that the Green Paper contains proposals for stiffening the obligations on companies to consult their employees and unions before making unilateral changes to their schemes. Unfortunately, the current minimum funding requirement did not provide the level of security that many thought it might, and that is why there is widespread agreement in the industry and across the field that we are right to be considering changes to the MFR. One of the difficulties is that it has led to short-term decision making and inflexibility. In a time of fluctuating stock markets, to say the least, short-term decisions are not necessarily the best thing for pensions, which are of course a long-term business.

Mr. David Heath (Somerton and Frome)

Does the Minister agree that, when one considers the whole spectrum of investments, including pensions, split funds and life insurance, one can see, without wanting to appear too alarmist, that there is a real risk of people losing confidence in all financial instruments. Is it not therefore incumbent on the Government to apply their mind to the problem with rather more urgency than is suggested by a Green Paper process, which may mean that effective remedy is years and years away?

Maria Eagle

We have to strike a balance between responding urgently to daily headlines and situations that change very quickly and bearing in mind the fact that pensions are a long-term business. We will not get the best framework for private pensions saving over the long term if we react daily and make changes that deal only with issues that are in the headlines. We will not ensure that people save enough in private pensions for their retirement if we do not have the right framework in the long run, so the most important thing is, with as much consensus as possible in the House and across the industry, among employees and employers, to get the right system in place to provide the protection and balance that will enable people to save appropriately for their retirement.