The Prime Minister and Chancellor met with business leaders last week to unveil proposals aimed at increasing flexibility for occupational defined benefit pension schemes.

Under the new plans, restrictions will be lifted on well-funded occupational defined benefit pension schemes, allowing those in surplus to invest more freely. The aim is to stimulate economic growth by enabling businesses to utilise these funds more effectively.

Currently, around 75% of such pension schemes are in surplus, amounting to £160 billion. However, existing restrictions have made it challenging for businesses to invest these funds, even when both trustees and sponsors are in favour.

What will change?

The proposals will allow trustees, with agreement, to share a portion of the scheme surplus with sponsoring employers. Employers could then choose to:

  • Invest in their core business
  • Provide additional benefits to pension scheme members

Jonathan Lipkin, Director of Policy, Strategy & Innovation at the Investment Association, welcomed the proposals, stating:
“With the right guardrails in place, the government’s proposals could help channel more funding into the economy, by enabling schemes to invest more widely and take on greater risk, while allowing for members to receive an uplift to pension benefits.”

See: https://www.gov.uk/government/news/pension-reforms-to-go-further-to-unlock-billions-to-drive-growth-and-boost-working-peoples-pension-pots