That is precisely the purpose of the formula that I have arrived at. Let us imagine that the firm has to fill the vacancy. Suppose it decides to recruit precisely such a person as the man it has got and starts to consider what it will have to pay and what pensionable service would be appropriate to credit the man joining the scheme for someone whom the firm perhaps does not consider to be a man whom it is recruiting for ultimate promotion to the board but whose trajectory would be precisely parallel with that of the person whom it does not evaluate particularly highly who, nevertheless, is in a fairly senior job in middle life. The conventions and casework could soon build up. If the House decides that this formula is appropriate, it will not be long before professionals would be able to come to an agreement that will result in a clear settlement on a figure.
In the early days, once the House accepted this formula, there would be room for disputes. There will always be room for disputes. Professional opinion will quickly come to a consensus, however, and I am sure that in 99 per cent. of cases an early leaver will be willing to leave it to his advisers to settle on a figure, and that figure would be accepted. We will not see endless disputes after a year or two if the House accepts my formula. At all events, that is what I am advised by people who work in the profession.
When an employee gets to his new firm, he will have a cheque of perhaps quite a large value. He must negotiate with that cheque to get what terms he can. If the new firm's scheme is totally different—it may be contracted out, whereas the other was contracted in, or it may be based on a different age of retirement of totally different accrual basis—he must negotiate his entry into the new firm. That is up to him; but he will bring a cash value with him equivalent to what he has withdrawn from the previous scheme.
I have to draw attention to a serious point in my new clause. In a case where someone is leaving a firm in which the pension fund is not fully funded, if he insists on taking out the whole of his asset, he is diminishing somewhat the amount of money that is available to meet the liabilities of the fund to the other employees who remain with the first employer. If we are talking about just one or two people leaving a large firm over the course of time, that may not be important, even if the scheme is seriously underfunded for one reason or another. But if, for instance, a firm is hitting a bad patch and is in difficulty in funding the scheme anyway and many people decide to leave or are encouraged to leave early because the firm is not able to offer them much of a future, and if they use my formula as the basis of valuation, the early leavers might take so much out of the fund that it becomes totally unable to meet its liabilities to those employees who remain faithful to the firm. That is not my intention. It would merely put an early leaver in a position to cheat the stayers. That is not what I want.
I have therefore made the provision that, when a scheme is underfunded, an early leaver has the option of either taking a transfer value that is reduced by the percentage to which the scheme is underfunded, or leaving a preserved asset with the employer that would constitute the full amount of the asset. The employer would then have to honour the commitment at the normal age of retirement, which might be many years afterwards. That is not an attractive choice for the early leaver. If he is leaving the firm because he has doubts about its viability, he may not be too happy about leaving his preserved asset in the hands of trustees who may not have all the money that they need, even 20 years hence, to pay out according to the real value of his asset. Equally, if he takes a transfer value that must be diminished by 10 per cent., 20 per cent. or 50 per cent. because the fund is underfunded at the moment he insists on his cheque, he puts himself in a bad position when he negotiates with the new employer, or, for that matter, puts his money into a private pension scheme under the options that are now opening up under my right hon. Friend's proposals.
It is an invidious thing to be leaving a fund that is in low water. In that case, one may find that one's private sector pension scheme does not give the same security that one would have if one had been in the public sector. We must take that fact into account. Inevitably, private sector schemes are subject to the vagaries of the market and the future of the employer and other factors, whereas schemes that are underwritten by the taxpayer have a sort of cast-iron security that the private sector finds it difficult to match.
The House has been extremely indulgent with me in allowing me to explain all these points. I look forward to hearing what other hon. Members may have to say, particularly what my right hon. Friend may have to say. The Departments concerned with occupational pension matters have had an opportunity of looking seriously at my proposals. They are not new. I introduced them a year ago in a similar situation. There is an overwhelming consensus that the present way of dealing with early leavers is unjust and contrary to the national interest. If my right hon. Frend accepts that fact but does not accept my new clause 1, the House is entitled to insist on his putting forward a better alternative.