NOTE FOR THE FILE
HMOCS: TREASURY MEETING ON 6 MARCH
Pa
HKA 233/1
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B 16/3
1. The reason for the meeting was for the Treasury to
discuss with Baring's the hypothecated loan scheme. Two people from Baring were present, two from the Bank of England, Mr Fish, myself and about 1800 from the Treasury.
2.
Baring's started off by implying that they thought that
this scheme would not/not be a runner. This was on the
basis that we were considering all pension entitlements
would be covered (ie not only just the commutable part) and
that it would be open to a large number of individuals
having retirement dates spread over a wide period of time
post-1997.
3.
They took a very different view, however, when it was suggested that the scheme might be limited to the commutable part of the pension only and that it might somehow be
targeted to reduce the number of people. In these
circumstances, they thought that institutions might well be
interested in the scheme.
4.
They thought that institutions would be prepared to
quote for the deduction they would require from a lump sum
being available in the year X for up to about 10 years. ie They would have a time horizon which would go up to about
the year 2002. Thus, people who were retiring up to 2002
could expect institutions to quote something approaching a
reasonable figure. Off the top of their heads, Baring's
thought that the banks would require discount rate of 12%.
This would mean, for example, somebody taking up this option
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