The Department for Work and Pensions has launched a call for evidence looking at how it might change surplus and other rules to help defined benefit (DB) schemes to invest differently.
The call for evidence published yesterday (11 July) - Options for DB Schemes - asks schemes a range of questions, including whether enabling trustees and employers to extract surplus at a point before wind-up could encourage more risk to be taken in DB investment strategies and enable greater investment in UK assets, including productive finance assets.
It also asked what tax changes might be needed to make paying a surplus to the sponsoring employer attractive to employers and scheme trustees.
The call for evidence also explores the potential benefits and drawbacks of a public sector consolidator, such as one run by the Pension Protection Fund - noting that, through such a move, the government might be able both to ensure investment objectives are met and promote long-term investment timeframes that would support investment in UK productive finance.
Launching the call for evidence, pensions minister Laura Trott said the government wanted to ensure that pension scheme money was working as effectively as it can for members, sponsoring employers and the UK economy and, as such, was considering whether more can be done with the assets of DB schemes.
Trott said: "We want to offer sponsoring employers and scheme trustees more choices going forward. This could include more consolidation options or more choices in how they invest DB assets and help them to generate greater surpluses."
She said, however, that the government was "acutely aware" that changes to how this level of assets are invested can have considerable effects on the economy, both positive and negative.
Trott added: "We will need to go cautiously and understand the impact of any suggestions on the UK economy as a whole. As well as ensuring pensions are protected, we must prioritise having a strong and diversified gilt market and our decisions must strengthen the UK's competitive position as a leading financial centre."
Commenting on the call for evidence Insight Investment chief executive Abdallah Nauphal said that creating a more conducive environment for DB pension schemes, by reforming the legislative and regulatory framework to keep these assets working, was "the best way to protect both the UK economy and member benefits".
He said: "DB pension fund surpluses have the potential to unlock over £300bn to invest in the UK economy which would reinvigorate UK capital markets. This is a once-in-a-generation opportunity which would ensure that pension scheme surpluses fulfil their potential.
"We welcome the commitment to protect the sound functioning and effectiveness of the gilt market and look forward to engaging with the government on this important issue."