Pension Protection Fund

Lord Haskel Excerpts

Tuesday 13th September 2016 Lords Chamber

Asked by

[Lord Haskel]

To ask Her Majesty’s Government whether the Pension Protection Fund will be able to meet its obligations to pensioners.

[Lord Young of Cookham (Con)]

My Lords, the Government recognise the importance of proper pension protection and are confident that the Pension Protection Fund will be able to make compensation payments now and in future. It has more than £23 billion worth of assets under management and a reserve of more than £4 billion. It is 116% funded; that is, it has 16% more money than it estimates it needs. That puts it in a strong position to face the future.

[Lord Haskel (Lab)]

I welcome the Minister to the Dispatch Box for his first Question. Bearing in mind the numbers he gave us, and also that the current BHS episode affects 20,000 people, and the recent warning from PwC that our defined pension schemes have a total deficit of £710 billion, are the Government satisfied that the current regulation is good enough to prevent poorly run schemes having to be bailed out by well-run schemes, which is the whole purpose of the protection fund?

[Lord Young of Cookham]

I am grateful to the noble Lord for his welcome. I think my career is on a downward spiral rather than an upward one. On British Home Stores, that pension scheme is now in the assessment period so far as the PPF is concerned. It is confident that, should BHS fall into the PPF, it has the resources to meet those obligations. On the very substantial figure that the noble Lord mentioned, that is a snapshot of all the liabilities of the defined benefit pension schemes were they all to have to buy annuities at the present moment. Of course, that is a volatile figure. When interest rates go down, the deficit goes up; should interest rates go up, the deficit would go down and in many cases disappear. One must look at this in the long term, with the volatility of the economic cycle taken into account. A pension fund is, after all, a long-term investment.