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  Rt. Hon. Frank Field MP  
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Changes needed to restore confidence in UK pensions

23 March 2004
sharingPensions.com was privileged to meet with the Rt. Hon. Frank Field MP, at Portcullis House, House of Commons on 23 March 2004. Mr. Field was Minister for Welfare Reform, Department of Social Security in 1997-98 and had been

 
Rt Hon Frank Field MP, House of Commons
specifically charged with 'thinking the unthinkable'. He actively seeks to improve and amend new and existing legislation and has been MP for Birkenhead since 1979.

We first asked Mr. Field if the problems faced by employers now, in keeping final salary schemes open to new entrants, are really that much worse than, say, the late 1970s. He explained that successive Chancellors have made things worse. In particular Nigel Lawson's Finance Act 1987 taxed pension schemes holding assets greater than 105% of liabilities. He said that Mr. Lawson thought pension schemes were a tax fiddle and took action to reduce the tax privileges. This

"there has been
an unholy alliance between some employers and Actuaries"

  resulted in surpluses being run down in fat years, meaning there was no surplus to draw upon in leaner years and whilst some of the measures were designed for long term growth, in the short term pension schemes have suffered and they may not be around in the long term.

For some industries in particular, globalisation has put companies under greater pressure on costs and margins. However, "I do think there has been an unholy alliance between some employers and actuaries which has encouraged actuaries to give rosy valuation reports and then it just so happened that they were re-appointed as the actuary", said Mr. Field.

Company managers may also be accused of irresponsibility if they do not take a critical view of pension costs. Because the media industry has been particularly hard hit by globalisation and the loss of jobs for life, it has promoted the view that this was typical of all industries and that is what we all came to believe. The same kind of campaign has been run over pensions with employers thinking that everyone is closing their pension scheme. He said that, sadly, the "British like a panic" and this has been applied to final salary pensions.

Furthermore, with the closure of final salary pension schemes to new members it will not be that long before current members become a minority of the firm's workforce.

We asked if the improvements in life expectancy really should have taken employers and insurance companies by surprise. Mr. Field explained that it ought not to have, as life expectancy has been

 
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