Tue, 28 Jan 2025

Pension shake-up plan aims to boost growth

Restrictions on surplus cash in pension schemes could be eased to get more money into the economy.

* The government proposes easing restrictions on managing defined benefit pension schemes, which have a total surplus of £160bn.
* Much of this money is currently trapped and cannot be invested in the wider economy.
* The government's priority is economic growth, which has been struggling to expand, with zero growth between July and September and only a small uptick in November.
* Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves have emphasized the importance of growth in policy decisions.
* A consultation on pension reform aims to unlock billions of pounds for alternative use in the economy, schemes, or companies.
* Defined benefit pensions are directly linked to workers' salaries and length of service, with three-quarters of funds in surplus.
* Pension experts warn that redeploying surplus funds poses risks, but The Pensions Regulator supports the government's plans.
* Companies would need to agree to release money without putting members' pensions at risk, and there is no guarantee they will invest the funds.
* Critics argue that the proposed reforms may not deliver a "quick win" for growth and could be a "damp squib".
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