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Marconi Pension Fund

Typically, my hon. Friend makes a strong point, and it raises a question: why is Pension Corporation interested in Marconi/Telent? As I say, 93 per cent. of the buy-out is to be funded on a conventional insurance buy-out basis, which means that Pension Corporation cannot touch the funds for 12 years. However, questions arise as to how the remaining 7 per cent. of the buy-out is to be funded. If, as many people think will be the case, this shortfall is funded with riskier developments, what would happen if those riskier developments did not pay off? We have seen many examples of that happening and the people who end up suffering are the pension holders. Similarly, if Pension Corporation exceeds 105 per cent. of the buy-out sum, the corporation has access to the escrow. For the benefit of clarity, I should say that an escrow is an arrangement whereby the employer pays funds into an account, which passes to the pension scheme under certain conditions, but is otherwise returned to the employer. Again, that raises the question of who owns the pension. Is it the pensioners, or is it the company seeking its assets? Also, what happens after the first 12 years have passed? In the lifetime of a pension fund, that is not a huge amount of time for a well-managed fund. However, any losses during such a period—due to poor investments, for example—can seriously undermine the fund. Again, we have seen examples of that and they have always been to the detriment of the pension holders. In my view, Pension Corporation's business model represents a serious potential conflict of interest. In November 2007, the pensions regulator determinations panel noted that the potential conflict of interest in this model was so compelling that it was not clear that it could be resolved. The chief executive of Pension Corporation, Mr. Edmund Truell, has rebutted that and argued that the company's model is a ““hedge”” against the ““risk”” of longevity. By that, I take it that he is referring to the fact that people are living longer and the actuarial arrangements in the fund do not cover that fully. However, to date no successful hedge of this kind has ever been operated. It would be exciting if the claim were true and we would avoid dampening innovation, but it is such a bold claim that it feels like the 21st century financial equivalent of a perpetual motion machine. If it does not work, how can pensioners' risks be mitigated?