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Occupational Pensions (Temporary Insolvencies)

Volume 461: debated on Monday 4 June 2007

7. If he will take steps to assist workers whose occupational pensions were wound-up by companies which were fully solvent but which created temporary insolvencies and closed pension schemes. (140296)

Ongoing solvent employers have a clear moral duty to support their pension schemes and to provide the benefits that members were expecting. The taxpayer should not be expected to step in and make up such shortfalls in scheme funding levels where there is a sponsoring solvent employer. However, we recognise the complexity of this issue, and one element of the financial assistance scheme review of scheme assets is to examine whether—in addition to those with compromise agreements—there are other pension schemes where it would not be reasonable to expect the employer to have a continuing responsibility for supporting an underfunded scheme.

Has the Minister read the forensic accounting study sent to him that showed that some leading American companies—highly profitable companies, such as EMC, EDS and Parsons—systematically manipulated their UK subsidiary accounts to create temporary insolvencies, wiping out their pension obligations? In those circumstances, will British pensioners be entitled to financial assistance scheme compensation, and will the Minister then pursue the companies to compensate the British taxpayer?

I obviously cannot comment on individual cases, but if the hon. Gentleman is concerned about those schemes, they should apply to the financial assistance scheme operating unit to find out whether they are eligible. We have drawn the definition of insolvency as widely as possible to allow people to do so, and it is also open to him to make representations to the Young review to find out whether they should be included in that category.

More than 50 per cent. of occupational pension schemes have assets that far exceed their liabilities, and other schemes are rapidly catching up with them. Can my hon. Friend give the House any assurance that we can stop employers raiding those pensions schemes in the future or creating contribution holidays for them, as happened in the past, which is exactly what got them into trouble?

I can give my hon. Friend the assurance that we now have a much more effective regulatory framework, and partly because of that framework and the pensions regulator’s work, deficits are falling, exactly as my hon. Friend says. The regulator works very closely with trustees to ensure that the promises that have been made to people will be delivered, because people are making contributions on that basis and they should expect that to happen.