HC Deb 24 April 1989 vol 151 cc414-5W
Mr. Curry

To ask the Secretary of State for the Environment whether he has any proposals for transferring the cost of pensions increase to the local government superannuation funds in England and Wales; and if he will make a statement.

Mr. Gummer

Yes. There are a number of cogent arguments for transferring pensions increase costs to the funds in addition to basic pension costs which they already bear. It would help to make the true cost of local government pensions more apparent; it would accord with good accountancy practice; it would utilise the current significant surpluses in the funds; and, in the longer term, advance funding would generate its own investment income and reduce total costs.

For these reasons I have concluded that, subject to consultation with the relevant local government interests, regulations should he made to transfer these costs to the superannuation funds from 1 April 1990 onwards. I believe that such a transfer can be achieved without an overall increase in the total sum which local authorities currently spend on superannuation. I have in mind to remove the present requirement that the funds must be in a position to meet all foreseeable future liabilities, and to substitute a provision that they must be able at any point in time to meet three-quarters of their future liabilities. This would be entirely prudential, since the funds would at all times have sufficient capital to meet their obligations for many years ahead. In any case the entitlements of beneficiaries are underwritten by the employing authorities and do not depend on the funds as such.

If we proceed on this basis, I would expect that most local authorities in England and Wales would be able to reduce their total expenditure on superannuation below its present level, on average by about £6 per head of adult population. If, however, local authorities wish to suggest other ways of achieving the same objective, I will be ready to consider them. Meanwhile, I look to the funds' actuaries to work on the basis that the objective from 1 April 1990 will be as I am proposing.