Rachel Reeve's £160bn pensions reform plan hits snag as expert warns of savings at risk

LCP says that the government's £160bn does not tally with the £100bn surplus reported. (Image: Getty)

Rachel Reeves announced pensions changes past period that could supply a £ 160 cardinal boost for the economy.

The reforms, which physique connected those announced by her predecessor Jeremy Hunt during his Mansion House speech successful the metropolis of London successful July 2023, impact loosening restrictions connected defined payment pensions, which see alleged last wage pensions.

The plans mean that schemes with a surplus—money 'leftover' aft accounting for each savers and pensioners—can usage that currency to put successful much risky but perchance higher-growth assets, including increasing UK companies.

However, 1 pension adept has noticed a occupation with the header figure.

David Wrigley, spouse astatine LCP and an concern expert, said the Government’s plans for extracting ‘surplus’ DB funds spell overmuch further than astir person realised.

According to The Pension Regulator, determination are lone £100 cardinal successful surplus funds successful UK pension schemes.

But Mr Wrigley said the Government had referred to £160 billion.

Mr Wrigley said the lone mode to £160 cardinal is to number arsenic a surplus thing supra what is known arsenic the ‘low dependency’ level.

The debased dependency level is wherever a strategy tin put successful much boring assets, specified arsenic gilts, and has a precise debased accidental of needing to telephone connected the sponsor (the institution moving the pension scheme) for fiscal help.

Using this overmuch little threshold, LCP estimates that this brings implicit 1,000 much schemes into scope, immoderate of which volition beryllium higher dependency, which means they are much astatine hazard of not being capable to wage retired their members' pensions.

Mr Wrigley said: "The Government’s absorption connected the £160bn fig is noteworthy arsenic it suggests a presumption that surpluses should beryllium disposable for organisation earlier a DB strategy reaches afloat backing connected a buyout measure."

LCP said much extortion whitethorn beryllium needed, and the Pension Protection Fund whitethorn request to beryllium beefed up to forestall employers from utilizing schemes to put successful much risky assets.

Wrigley said the thought of freeing up surpluses was affirmative but needed to beryllium thought through.

"This has the imaginable to truly summation the entreaty of running-on pension schemes with the imaginable for sooner, and larger, entree to surpluses. The argumentation intent is welcome, with the imaginable of existent economical maturation wins for the UK, each portion protecting the gilt market. However, “the devil volition beryllium successful the detail”, successful peculiar the item of however members volition beryllium protected and the grade that pension strategy trustees are legally constrained successful their usage of immoderate caller flexibilities.”

The DWP has been approached for comment.