Member

I have to say that, whenever I hear or see “surplus”, either spoken or in reference to a pension fund, I immediately put it in quotation marks because, as the noble Lord, Lord Davies, said, it has no defined meaning and there is no great certainty as to exactly what it is; it is a best guesstimate at a certain moment in time, and both sides of the equation are very open to movement. For example, in the fund with which I am involved, the surplus went from 120% to 150% in just over a month because two different calculations were done. This was almost entirely due to the liabilities having been reduced; the surplus grew because the amount of the liabilities went down. Equally, the surplus contains the interest on the previous surplus, which is also calculated as part of how it is looked at. Many factors come into it, including the make-up of the discount rate used and the strength of the employer’s covenant. So, in looking at this matter, I have huge sympathy with the noble Lord’s proposition that we would be better off using “assets”, rather than “surplus”.