Working people and businesses are set to benefit from new rules that will give more flexibility over how occupational defined benefit pension schemes are managed, as the government continues to remove blockages that are inhibiting its growth agenda that will improve lives of working people across the UK
Hosting a meeting with leaders of Britain’s biggest businesses in the City of London today (Tuesday 28 January), the Prime Minister and the Chancellor will set out the details of changes and tell some of the country’s leading CEOs that Britain is back and open for business.
At the roundtable, the PM and Chancellor will outline how restrictions will be lifted on how well-funded, occupational defined benefit pension funds that are performing well will be able to invest their surplus funds.
This follows action taken by the government last week to bring a renewed focus on growth from some of the UK’s biggest regulators, a shake-up to legal challenges on planning applications, and new “brownfield passports” to speed up housing in commuter hotspots.
Prime Minister, Keir Starmer said:
Chancellor of the Exchequer, Rachel Reeves said:
The Prime Minister and Chancellor will tell CEOs from some of the UK’s most successful companies that that the government is seeking to create the best possible conditions for the private sector to thrive. They will promise to work in partnership with businesses, to deliver high-quality jobs across the country, and the economic growth that will fund the schools, hospitals and roads that we all rely on.
Pension trustees and the sponsoring employers could then use this money to increase the productivity of their businesses – to boost wages and drive growth or unlock more money for pension scheme members.
High growth and more productive businesses boost the size of the economy which in turn will fund our vital public services.
This more efficient approach demonstrates that the government has been listening to business, and will give businesses more flexibility, allowing trapped surplus funds to be invested into the wider UK economy, or given to scheme members as additional benefits.
Where trustees agree to share a portion of scheme surplus with a sponsoring employer, the employer may choose to invest these funds in their core business, for example to purchase equipment or supplies, and/or provide additional benefits to members of the pension scheme.
Approximately 75% of schemes are currently in surplus, worth £160 billion, but restrictions have meant that businesses have struggled to invest them.
These reforms build on the Chancellor’s Mansion House reforms which will create pension megafunds as part of the biggest set of pension reforms in decades, unlocking billions of pounds of investment in exciting new businesses and infrastructure and local projects.
Over £1.1 trillion is held by pension funds in the UK and defined contribution pension schemes are set to manage £800 billion worth of assets by the end of the decade. This Government is determined to encourage these pension funds to deliver investment and drive economic growth – which is the only way to make people better off.
Jonathan Lipkin, Director of Policy, Strategy & Innovation at the Investment Association said:
Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Saving Association, said:
Patrick Heath-Lay, Chief Executive Officer for The People’s Pension, said:
The roundtable discussion will focus on the government’s partnership approach to growth with business, including how regulation can better support the Growth Mission, and the role of business in achieving the UK’s ambitions in AI which the Prime Minister unveiled earlier this month. Every regulator has a role to play in the Growth Mission and the Chancellor is hosting a series of roundtables with the 17 regulators that the Prime Minister wrote to in December, to discuss their proposals to support growth in the coming year.
The meeting with CEOs comes days after the Chancellor’s return from the World Economic Forum, where she pitched Britain’s investment credentials and let global business leaders know that the UK is open for business again. She championed early reforms to planning, pensions, and regulation that make it easier to do business in Britain and remove barriers investors from overseas face.
On Wednesday, the Chancellor will make a speech where she will set out plans to push through further planning reforms to get Britian building again, rip up regulatory barriers so we can encourage more investment into the UK and announcements to boost trade and investment.
The government will set out the details of the surplus policy in its response to the Options for Defined Benefits consultation, due this Spring.
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