Simon Kew, Head of Market Engagement at Broadstone: “In amongst the significant growth announcements by the Chancellor, Rachel Reeves, in her speech today there is a plan to enable sponsors of defined benefit pension schemes to better extract surpluses in those funds. This could free up money that could be invested in the expansion of the business, increased job opportunities, pay rises, bonuses or other ways that would benefit the business and its employees. The antiquated process currently in place gives sponsors no appetite whatsoever to fund a pension scheme to a surplus when they have little or no ability to later access that money. In the world of DB pensions, I’m sure we’ve all heard of sponsoring employers reluctant to add more cash into a scheme for fear of a ‘trapped surplus’. The Chancellor’s plans address this concern and could unlock billions of pounds for UK businesses.”
Lou Davey Head of Policy and External Affairs at the Independent Governance Group comments: "Whilst keeping members benefit secure remains our key priority, we are encouraged that the government is addressing how scheme surplus can be better used to deliver value for all stakeholders. The ambition to unlock UK pension capital to help drive economic growth is commendable. Unlocking surplus funds in defined benefit schemes will enable greater flexibility to invest in productive and sustainable assets - infrastructure, innovation, and businesses. However it is important that policy levers incentivise trustees and sponsors to use surpluses productively, while clear safeguards are established to protect the financial security of members. To achieve this, collaboration between government and industry is essential. Trustees exist to serve the interests of beneficiaries, not solely to fuel the UK economy. The financial security of millions of pension members depends on getting this right."
Tom Froggett, Senior Consultant at XPS Group, said: “Rumours about DB surplus flexibilities have been circulating for some time, but this is the first time the Government has made its intentions crystal clear. We welcome these announcements as they present a fantastic opportunity to improve outcomes for members and employers. Unlocking DB surpluses could also play a significant role in supporting the Government’s growth agenda with our analysis showing that DB surplus flexibilities have the potential to release up to £100bn of value over the next decade to improve outcomes for members and employers. The key focus now shifts to how the Government will implement this safely and effectively. In our view there are two key elements to this - first, a statutory override to provide the ability for surplus to be released subject to certain safeguards, and second, clear regulatory guidance to provide trustees with a blueprint for running DB schemes on to build and use surplus safely.”
Gareth Henty, PwC’s Head of Pensions: The Chancellor is leaving no stone unturned in her pursuit of economic growth, and it is no surprise that Rachel Reeves is looking to unlock our estimated £250bn of surplus currently trapped in defined benefit (DB) pension schemes. Allowing DB schemes with surplus assets to deploy funds beyond their immediate obligations could certainly provide a level of the required investment for infrastructure, innovation, and broader economic growth. But, if the Government’s proposals are going to work, as well as tackling the fundamental issue of whether pension schemes’ trustees have the power to pay surplus assets to employers, they will need to tackle the more fundamental issues of why trustees should pursue these strategies. In particular, the proposals will need to think about how to address pension scheme trustees’ concerns that a strong funding position today could become a weak funding position tomorrow. The big question is whether, in pursuit of economic growth, the Government or PPF can underpin or provide any support for taking that risk”
Calum Cooper, Head of Pensions Policy, Hymans Robertson says: “Today’s speech from Rachel Reeves reiterates that DB pension scheme surplus sharing is the way she believes that DB pensions can help kickstart the UK economy. As a firm, this was our first wish for 2025 and we welcome the mention of this so early in the year. DB surplus reform is a key element in unleashing the full sustainable growth potential of our £3trn of pensions to drive a better future for pensioners, enterprise and for the planet. The prize is huge, but the effort to get this right is key. It will require ‘careful implementation’ and must meet the needs of pensioners first and foremost. But, to stop there would have been to leave tremendous sustainable growth on the table where it might be lost to future generations in the UK. It’s great to see the Government being bold and resetting the national tone away from risk prevention. It’s time to reconnect pensions with our economy and re-kindle our spirit of enterprise and entrepreneurial growth. The role pensions can play in this is phenomenal, and Government has fired the starting gun. We encourage the Government to continue to be bold and creative and think about how Phase 2 of the delayed Pensions Review can reduce our tax burden and further stimulate sustainable growth and better pensions: it can be done.”
Sarah Brown, Chief Actuary, Gallagher’s Benefits & HR Consulting Division, UK said: “After last year’s consultation and months of speculation, this week finally saw an announcement from the Government on pension scheme surplus, with some restrictions due to be lifted to make it easier for surpluses to be returned to sponsors of well-funded pension schemes. While the detail is still awaited, this announcement will be welcome for many schemes and sponsors who are keen to explore running-on their schemes and potentially exploring asset strategies designed to increase these surpluses. According to the Government, defined benefit pension scheme surpluses are in the region of £160 billion pounds, with total defined benefit scheme assets in excess of £1 trillion. In view of this, it is no surprise that there is such focus on how these assets are used: both in view of the impact on the wider economy and the potential to use those assets to benefit pension scheme members and sponsors alike. We are expecting further detail in the coming months, and all eyes will be on how any easements are applied while balancing the needs of pension scheme members and those who sponsor their schemes. By allowing surpluses to be returned to sponsors in certain circumstances, and with suitable safeguards, we hope to see more scope for innovation and opportunities for members and sponsors to share in the benefits of any excess returns achieved.”
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