A new plan to allow companies access to surpluses in their defined benefit pension schemes has been floated by PM Kier Starmer and Chancellor Rachel Reeves.
After a run of years with high interest rates, many of these types of pension schemes, which are outside of the public sector and almost all closed to new members, are now in surplus.
That has sparked a boom in annuity deals in recent years as insurers have paid companies to take over these in-surplus pension schemes and manage their administration or run them off.
According to the Treasury, roughly three-quarters of all private defined benefit schemes are currently in surplus, worth £160bn.
Steve Webb, partner at pension consultancy LCP and a former pensions minister, warned that the risks remained substantial even so with trustees likely to want guarantees from Britain’s taxpayer-funded Pension Protection Fund (PPF) before agreeing to a buy-out.
Webb said: “Ideally the Government would go further and offer a way of guaranteeing member benefits, such as enhanced cover by the PPF, which would allow all surplus schemes to participate in this new option.”
Prime Minister Keir Starmer said: “Today’s changes will unlock billions of investment.”
Former state-owned companies have some of the largest pension fund liabilities, with BT Group PLC (LSE:BT.A) currently for a pension fund deficit of £3.8 billion, down from £8 billion in 2020.
Sahres in BT rose 1.75% to 142.8p.