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Marconi Pension Fund

Of course, Pension Corporation will have its own view on that. As I have said, because there are some quite difficult legal and other issues, I do not want to comment too directly. I want to focus more on the model, and concerns could arise with the model of companies buying, perhaps, an under-priced company with a pension scheme, using either valuation or a bid from an insurance scheme to try to get a grip on the liabilities of the pension scheme and taking the surplus from it. That is essentially to treat the pension scheme merely as a commodity from which to seek a profit. We need to be careful about our approach, because there are circumstances in which buy-outs are right and work, but there are others where they do not. However, it is important to tell trustees that they need to look carefully at the security of member benefits and involve the regulator early if they have concerns. I am concerned that the intrinsic risks of the new business models present a real downside. Suppose that investments fail to perform as expected. If the link between the scheme and the employer has been severed without adequate capital being put in place to back the risks of the scheme, there might be no backstop to ensure that benefits will be paid as promised. In a worst-case scenario, the provider could be driven into insolvency and the scheme could enter the PPF with a funding deficit. That would mean scheme members receiving PPF compensation that was lower than the pensions that they had expected, the PPF having to cope with new costs and PPF levy payers—that is, continuing pension schemes—having to pay higher bills. We cannot avoid every risk, but that does not mean that we should take reckless risks with members' benefits, or with the finances of the PPF. We need to look critically at new business models to ensure that we have the tools to manage risks proportionately. We should all recognise the potential of confidence and the dividend of stability in the pensions industry. However, I also want to emphasise that we recognise the importance of innovation in financial services. It is important that I say that. I welcome the innovation that has flowered in the pensions industry in the past couple of years—greater competition, novel product development and, indeed, some of the buy-outs. There are clear benefits in some cases. Innovation can be good, but not all innovation is good, and supporting innovation generally should not mean condoning proposals that could be harmful to pension members' interests. For example, in another area of pensions policy, I had to judge yesterday whether it was the right time to allow new providers such as Brighton Rock to compete with the PPF by exempting schemes that have bought its products from paying PPF levies. I took the view strongly that this is not the right time to do that. For the moment, I believe that we need stability in the pensions market to strengthen confidence. My right hon. Friend asked how we can ensure that regulation will be effective in relation to the new models. Paul Thornton's 2007 review of pensions institutions concluded that current arrangements are working well and made recommendations aimed at strengthening the system, including the relationship between the pensions regulator and the FSA. I am glad that both organisations have taken those recommendations seriously, but I also recognise that changing market environments prompt us to keep the boundary between their remits under review. We are considering whether change is required to clarify which body is responsible for regulating providers in the pension buy-out market. I welcome innovation and recognise that we need to ensure that regulation keeps pace with a changing market. We are dealing with a fast-changing market, with new models in it. We will need to ensure that key risks are managed effectively by watching what is happening in the market, identifying the risks and being prepared to act early and quickly to demonstrate that the Government are prepared to deal with problems. I am willing to consult formally, and to bring amendments before Parliament to increase the regulator's powers, if that is the best way forward. I have already demonstrated that willingness through the changes that I have made to the Pensions Bill as it has progressed through the House, increasing the abilities of the regulator to appoint trustees, as in the case raised by my right hon. Friend. It may be appropriate to strengthen the regulator's anti-avoidance powers further, and I am prepared to consider that. Such powers need to be focused on dealing with a particular mischief. Where they are broad because they have to deal with a constantly adapting innovative sector, they need to be targeted by guidance. When the pensions regulator was created, there was concern in the City, but the regulator has done an excellent job of reassuring the City while tackling particular problems. I have no wish to give the regulator unconstrained powers to reopen old wounds, but I cannot allow the development of business models that raise serious concerns. I know that well-intentioned legislation can bring undesirable consequences if it is not thought through effectively, and we recognise the importance of deregulation, which is why we set up a rolling deregulatory review to strip out unnecessary legislative requirements and costs, but I am keen to continue to discuss the issues to see whether, in the light of changing developments in the relevant area of the market, we need to take further steps in the coming weeks and months. I want to hear the views of the financial services industry and the pensions industry, trustees, trade unions, employers and business. Our shared aim should be to ensure that pension promises are kept and pensioners are secure in retirement, and that we are in a position to build renewed confidence in UK pensions, for which all hon. Members have a responsibility, so as to protect, deepen and advance the circumstances in which pensioners today and in future—and indeed those who have already retired—can look forward with a degree of confidence and security.