Occupational Pension Schemes

HC Deb 16 March 1983 vol 39 cc205-6W

Mr. Wolfson

asked the Secretary of State for Social Services if he has reached a decision regarding the representations made to him about the premiums payable from 6 April 1983 by occupational pension schemes which buy back into the state scheme.

Mr. Fowler

Following technical discussions between the Government Actuary and the pensions interests, I have today laid before the House amending regulations which limit to 25 per cent. the premium increases to be phased in from 6 April 1983.

Mr. McCrindle

asked the Secretary of State for Social Services when he intends to ban the practice known as the franking of benefits by occupational pension schemes.

Mr. Fowler

Draft regulations have today been referred to the Occupational Pensions Board for its advice and report.

The draft regulations affect all people who leave contracted-out employment before state pension age but after the regulations come into operation, and ban the practice of "franking" in respect of the guaranteed minimum pension—GMP—rights they have accrued in that employment since 6 April 1978. "Franking" is the practice, now widely regarded as objectionable, whereby the statutory requirement to revalue GMP rights from the time of leaving up to pension age is met by reducing, or sometimes extinguishing, the pension rights in excess of the GMP.

The regulations also limit the deductions for state scheme benefit which are made from deferred pensions by schemes which provide a target pension including the state pension.

In making these changes, the regulations will fully implement the recommendation made on franking by the Occupational Pensions Board in its report on early leavers—Cmnd. 8271. They carry forward the undertaking I made to the House, in my reply to my hon. Friend on 19 October 1982—[Vol. 29, c. 71]—that the Government would prohibit the practice of franking in relation to pension rights accruing in the future. In fact the regulations will, as I have said, apply to all GMP rights accrued in the relevant employment since April 1978 up to the date of leaving but will apply only to future early leavers.

The regulations, which I hope will come into operation later this year, will ensure a fairer deal for the early leaver. I hope also that schemes will consider whether they can avoid further franking for those who have already left.