Rachel Reeves. Source: CC Kirsty O'Connor / HM Treasury
Chancellor Rachel Reeves will announce plans to unlock billions of pounds from corporate defined benefit (DB) schemes as part of the government’s drive to boost economic growth.
Articles by the Financial Times and Sky News have reported that chancellor Rachel Reeves will use her growth speech on Wednesday to disclose that she wants to use so-called surplus release to boost investment in the economy – with government sources saying the move could "unlock" more than £60bn of pension surpluses held in DB schemes.
"The devil is in the detail but we are positively inclined," one government insider told the Financial Times.
It is understood the surplus release plan could be included in a pension schemes bill expected to be published in the coming months.
PP has contacted HM Treasury for comment on these reports. A spokesman said it does not comment on speculation.
The reports follow Rachel Reeves' Mansion House speech in November last year – which set out plans to create pension "megafunds" through a series of reforms to the Local Government Pension Scheme (LGPS) and defined contribution (DC) schemes, but failed to take forward measures on corporate DB scheme surpluses.
The previous Conservative government had looked at reforms to the way scheme surpluses can be used – with Jeremy Hunt launching a call for evidence on options for defined benefit schemes in July 2023 and formally consulting on measures to make surplus extraction easier and the design of a future public sector consolidator in February last year.
Following Reeves' Mansion House announcement in November, the industry said the speech was a "missed opportunity" for DB schemes as it failed to provide clarity around how surpluses could be used.
Barnett Waddingham partner and head of DB endgame strategy Ian Mills was one of those expressing disappointment. At the time, he noted: "If Rachel Reeves wants capital investment into the UK then the corporate DB pension sector is the obvious place to focus on. But all we got on this was silence.
"There are literally hundreds of billions of pounds sat in these pension schemes doing very little and without reform this will simply be passed to the insurance sector. Instead, she could have enabled it to be directly reinvested in British businesses by enabling scheme sponsors to access a fair share of it. Pensioners could have benefitted too, by allowing their share of it to be used to uplift pensions. Instead, it appears this will simply find its way to insurance company shareholders."
