HC Deb 17 February 1992 vol 204 cc32-3W
Mr. Wilshire

To ask the Secretary of State for Social Security when he will introduce regulations to place restrictions on the investment of the assets of occupational pension schemes in employer-related investments.

Mr. Newton

I have today laid before Parliament regulations under schedule 4 to the Social Security Act 1990 which will restrict to 5 per cent. the proportion of their resources which occupational pension schemes may invest in the sponsoring company, or any other company associated or connected with it. The regulations will come into effect on 9 March 1992.

The provision in the Act implemented a recommendation by the independent Occupational Pensions Board in its 1989 report entitled "Protecting Pensions" that self-investment should be restricted to 5 per cent.

The regulations follow a period of consultation with the board and with industry about how this objective can be achieved without causing undue difficulties for companies whose schemes already involve significant self-investment. The regulations therefore include transitional provisions which will give schemes time to reduce any existing self-investment, but which will prohibit the acquisition of any new self-investment while the 5 per cent. limit is exceeded.

Where self-investment exceeds 5 per cent. on 9 March 1992, transitional arrangements permit self-investment to continue to exceed 5 per cent., but only in the following restricted circumstances:— where a pension scheme has made a loan to the sponsoring employer which is current on 17 February 1992, the employer must repay the loan to the pension fund to reduce self-investment to 5 per cent. by 8 March 1994 or, if later, the earliest date on which repayment can be enforced; where a pension scheme has more than 5 per cent. of its assets invested in the sponsoring or associated company in the form of equity of that company listed on a recognised stock exchange, the scheme's holding must be reduced to 5 per cent. by 8 March 1994; where a pension scheme has more than 5 per cent. of its assets invested in the sponsoring or associated company in the form of equity traded on a second tier market of a recognised stock exchange, the scheme's holding must be reduced to 5 per cent. by 8 March 1997; a pension scheme may continue indefinitely to hold more than 5 per cent. of its assets in the sponsoring or associated company in the form of the equity of the company if a private company or in the form of property leased to the company. While however the self-investment exceeds 5 per cent. the pension scheme may not acquire any additional self-investment.

The self-investment restrictions do not apply to:— —the investments of small self-administered schemes where the number of members is fewer than 12, all the members are trustees and all the members have agreed in writing to the self-investment; —individual insurance arrangements where the member agrees in writing to the insurance company investing in the member's company; —employer-related investment held in bank or building society accounts; —employer-related investment derived from members' additional voluntary contributions.

The regulations also impose an obligation on pension scheme trustees to disclose to scheme members, beneficiaries and trade union details of any self-investment, whether it exceeds 5 per cent., and whether, and if so how, they propose to reduce the percentage.

Mr. Kirkwood

To ask the Secretary of State for Social Security what consideration is being given by his Department to any changes that may now be necessary to pension fund regulation; and if he will make a statement.

Miss Widdecombe

I refer the hon. Member to my reply to the hon. Member for Leyton (Mr. Cohen) on 20 December 1991 at columns374–75 and to my hon. Friend the Member for Spelthorne (Mr. Wilshire) today.