Occupational Pensions (Hansard, 19 October 1982)

§ Mr. Fowler:

The Occupational Pensions Board has sent me its report on greater security for the rights and expectations of members of occupational pension schemes: its report is being published today.

I should like to take this opportunity of thanking the board for what is clearly a very thorough examination of the issues. In particular I should like to express my appreciation to the former chairman of the board, Lord Brimelow, for his achievement in securing the delivery of this valuable report to me before he retired, within the time limit originally envisaged for the report.

The Government welcome the recommendations in the board's report, in particular those concerning the disclosure of information to members. This is one of the most important ways of helping pension scheme members themselves to ensure that their schemes are managed in their best interests—a matter to which the Government attach the utmost importance. The Government therefore accept in principle the need for legislation to regulate this aspect of pension scheme management, and I shall be consulting interested parties about the content of such legislation. In addition, a working party of officials is being set up to examine the law and conventions governing the conduct of pension funds. The Government will welcome representations from the public and from any organisation with an interest in the matters mentioned above and discussed fully in the board's report. It would be helpful if representations could be sent to my Department by the end of December 1982.

I should like to take this opportunity to say something about the Government's view on the previous board report on early leavers. We have had a considerable number of representations and comments, for which we are most grateful. There is a clear recognition, which the Government share, that the rules of private sector occupational pension schemes do not always give a fair deal to early leavers, who suffer in comparison with the pension rights available for those who stay in a single pensionable employment up to pension age. To legislate so as to compel employers to improve provision for early leavers would, however, inevitably impose extra cost on industry, and—as the OPB recognised—the crucial question is how and to what extent this extra burden could reasonably be imposed. We must bear in mind that there will be wide differences in the abilities of different companies to afford improvements in their pension schemes.

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On balance, therefore, I do not propose to introduce immediate legislation to compel such improvements, but I will continue to keep the proposal of legislation under review.

The Government are, nevertheless, most anxious that pension schemes should introduce improvements for early leavers whenever they can. I therefore urge employers to include, in any consultations they mmay have on further changes in their pension scheme provisions, the possibility of achieving some such improvements. Leavers tend not to have any say in the running of the pension schemes they have left, and their interests are only too easily overlooked. In the interests of equity, and indeed also in the interest of improving job mobility, the Government will be looking initially to the pensions movement to secure improvements without legislation. I recognise that the other members of occupational pension schemes, in particular existing pensioners, also have a claim for a fair deal, and indeed in its report on security and solvency the board itself expresses the hope that any improvements in the revaluation given to early leavers' rights will also be made available to existing pensioners. These constraints are fully understood; but the Government still look to employers to make progress.

I shall be inviting the joint working group on occupational pensions to meet me from time to time to review progress arid I shall be carefully watching the progress achieved in considering the introduction of legislation.

The CBI. has recently issued guidelines to employers, urging them to remember the rights and expectations of early leavers when they are able to introduce improvements, and to explore ways of achieving this with their advisers and scheme members. The Government welcome this encouragement to go ahead with such improvements wherever possible.

The Government will be seeking a discussion with the NEDC later this year, to see how best we can still further encourage improvements in this particular field.

There is one recommendation in the OPB's report which I can implement without primary legislation, but by regulations. This is its recommendation to prohibit the practice, known as "franking", whereby some schemes implement the limited measure of revaluation reaquired by the contracting-out requirements by simply allowing a corresponding erosion of those occupational pension rights which exceed the contracted-out guaranteed minimum pension. I shall be putting to the Occupational Pensions Board draft regulations to prohibit this practice in relation to pension rights accruing in the future, and I hope that, in the light of the board's report to me on those regulations, I shall be able to introduce them in the first half of next year. I announce this now as an indication (if the Government's desire to secure a fairer deal for early leavers and of our anxiety that employers should consider with the utmost care how they can help.