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Atomic Weapons Establishment Pension Scheme

Volume 717: debated on Wednesday 6 July 2022

My right hon. Friend the Defence Secretary has today laid a departmental minute to advise that the Ministry of Defence is creating a new contingent liability associated with the provision of a Crown guarantee to the trustees of the Atomic Weapons Establishment defined benefit pension scheme.

The departmental minute describes the contingent liability that the Ministry of Defencewill hold. The contingent liability will become effective from 21 July 2022.

AWE has been sponsored and wholly owned by the MOD as a non-departmental public body since 1 July 2021. AWE produces the UK nuclear warhead which underpins our independent nuclear deterrent.

AWE operates two pension schemes, one of which is the AWE defined benefit pension scheme overseen by independent trustees.

The MOD has agreed with HMT that it will provide a guarantee to the scheme trustees, with the intention of securing that the scheme’s assets will be sufficient to meet its liabilities. This will ensure that the scheme members can have confidence that their accrued benefits under the scheme will be paid when eligible.

The contingent liability will continue for the duration of the scheme—until such time that all members and their entitled dependants are deceased—and will crystalise only in circumstances where the scheme is terminated early and or AWE is liquidated, becomes insolvent or cannot or does not make the contributions payable in respect of the scheme as they fall due. The MOD will note a liability of £150 million over 20 years in its accounts. If the liability is called, provision for any payment will be sought through the normal supply procedure.

In granting the guarantee, MOD and HMT have collectively agreed in principle, subject to applicable regulations and law, to bring the scheme’s assets and liabilities into central Government control in line with the Government’s principles for balance sheet management, while maintaining members’ existing benefits. Agreement to proceed on this basis would be subject to a detailed feasibility study being concluded in advance, including identifying the accounting and budgeting implications on the MOD, as well as any pension law compliance and value for money considerations. This study will be carried out in consultation with AWE and the trustees.