HC Deb 21 May 2002 vol 386 c298W
Mr. Peter Duncan

To ask the Secretary of State for Work and Pensions what proportion of pensions are underfunded on an MFR basis in the(a) public and (b) private sector; and if he will make a statement on trends in each sector. [57308]

Mr. McCartney

Private sector defined benefit pension schemes are generally subject to the Minimum Funding Requirement (MFR). Many public sector pension schemes are either unfunded (such as the Principal Civil Service Pension Scheme) or covered by alternative legislation (such as the Local Government Pension Scheme) and are therefore not subject to the MFR. There are, however, a number of funded public sector schemes to which the MFR applies, such as those covering employees of some non-departmental public bodies.

Information on the MFR funding levels of private sector defined benefit schemes is available from the Employers' Pension Provision (EPP) Survey. Information is not available for public sector pension schemes which are subject to the MFR.

The latest EPP survey, carried out in 2000, indicated that around one in eight (13 per cent.) private sector defined benefit schemes were less than 100 per cent. funded on the MFR basis. Six per cent. of schemes were funded at less than 90 per cent. and 7 per cent. were funded at least at 90 per cent. but at less than 100 per cent. Almost all schemes surveyed that were underfunded had taken action to rectify this situation. These actions included increasing the employers' contributions (78 per cent.), increasing the members' contributions (29 per cent.) and making a cash injection to the fund (19 per cent).

It is not possible at present to identify funding trends from the data available, because only one full cycle of triennial scheme valuations has been carried out since the MFR was introduced in 1997. However, in February 2002, for the purposes of the regulatory impact assessment which accompanied the regulations recently introduced to make interim changes to the MFR, around one in six private sector defined benefit pension schemes were estimated to be underfunded on the MFR basis. This estimate was based on information collected by the actuarial profession from consulting actuaries and insurance companies between 1997 and 2000, and has been adjusted by the Government Actuary's Department broadly to take account of the likely effects on scheme funding levels of subsequent changes in conditions.

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