HC Deb 11 June 2002 vol 386 cc1142-3W
Mr. Watts

To ask the Secretary of State for Work and Pensions if he will introduce proposals to change the pensions rules to remove the ability of companies to take contribution holidays from their employees' pension schemes. [51377]

Mr. McCartney

The Government do not have any plans to change the rules about, or to prevent firms from taking, contribution holidays from their defined benefit pension schemes. Under Inland Revenue rules, pension funds that are funded in excess of 105 per cent. of their liabilities must take action to reduce that surplus. That action might take the form of improved benefits for members, contribution holidays for members or sponsoring employers, or a taxable return to the employer.

It is for the individual scheme (trustees) to decide how best to deal with a fund surplus according to the particular circumstances of each scheme.

The Pensions Act 1995 provides that before any surplus is returned to an employer, all current and future pensions in payment should be increased annually in line with the retail prices index up to a maximum of 5 per cent. In addition, trustees have to satisfy themselves that the use of the surplus is in the interest of the members, and that members should be notified of the proposal.

Mr. Boswell

To ask the Secretary of State for Work and Pensions if he will make a statement on the development of statutory money purchase illustrations and composite annual pension benefit statements. [59063]

Mr. McCartney

We have been working closely with the Faculty of Actuaries and the Institute of Actuaries to produce regulations and guidance that will mean people paying toward money purchase benefits will, starting in April 2003, receive an annual illustration of what their future pension might be. Regulations were laid before the House on 20 May, and a technical memorandum has been published on the Faculty of Actuaries and Institute of Actuaries website.

This is an important development that will help people plan more effectively for retirement.

The combined pension forecasting service, that gives information about state and private pensions together, was launched in October 2001 at the industry's annual pensions show. Since that date, the service has been open to all pension providers to register their interest in participating.

We are also looking at the feasibility of a composite pension forecast, where information about state pension would be combined with details of private pensions from more than one provider. This is still at a very early stage, but we are working closely with the office of the e-envoy and people in the pensions industry.