§ Mr. BestTo ask the Secretary of State for Work and Pensions if he will introduce a legal requirement on employers to fund pension schemes that would ensure assets do not fall below the discontinuance funding ratio. [137917]
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§ Malcolm WicksGovernment proposals for regulating occupational pension schemes are set out in the documents "Simplifying the taxation of pensions: increasing choice and flexibility for all" (published in December 2002) and "Working and Saving for Retirement: Action on Occupational Pensions" (published in June 2003). Where a scheme with a solvent sponsoring employer is winding-up the Government believe that the employer should ensure the scheme has sufficient funds, as assessed on a discontinuance basis, to secure scheme members' expected benefits in full. We therefore propose to introduce a requirement to ensure that, in this situation, the debt on the sponsoring employer will be calculated on a full buy-out basis.
More generally, we propose to replace the minimum funding requirement (MFR) for defined benefit schemes with scheme specific funding requirements. Under our proposals it will be the responsibility of each scheme's trustees, working with the sponsoring employer and the scheme actuary, to develop a funding strategy aimed at ensuring that the scheme is able to meet its long-term pension commitments. Where a scheme is not winding-up we do not believe it would be appropriate to introduce a requirement for its funding to meet any prescribed minimum level as assessed on a discontinuance, or any other, basis.
Improving member protection is a Government priority, which is why we are introducing the new Pension Protection Fund. It will enhance protection for pension scheme members and improve confidence in pension provision in general, by ensuring that members of defined benefit schemes will still receive a meaningful retirement income if their sponsoring employer goes bust and the scheme is under funded.