Big pension rule change from Reeves to unlock £60bn investment boost for UK economy

Prime Minister Keir Starmer and the Chancellor set out the details of changes during a meeting with the leaders of Britain's biggest companies earlier this morning, as well as how restrictions will be lifted

At the roundtable, the PM and Chancellor will outline how restrictions will be lifted on how well-funded, occupational defined benefit pension funds that are performing well, Sky News reports.

Under the proposed change, Reeves would make it easier for sponsors of defined benefit pension schemes to access surplus funds, potentially injecting billions into the British economy.

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As it stands, existing pension rules surplus funds can typically only be accessed when a scheme winds up, with specific regulations varying between each individual scheme.

The Government previously conducted a call for evidence from relevant stakeholders on potentially increasing direct benefit pension scheme investments in productive assets.

Industry responses suggested that changes to surplus rules could generate £100billion for companies and pension scheme members by 2034, bolstering the retirement savings for many Britons.

Notably, experts from the sector expressed frustration over delays in implementing these proposals, arguing for DB pension market reforms alongside recent changes to defined contribution and Local Government Pension Scheme rules.

Despite support for the proposed changes from those working within the pension sector, analysts emphasise that robust safeguards must be in place to protect member benefits.

Business management consultancy LCP has highlighted that key details about member protection measures and the trustees' role in the surplus release are yet to be clarified.

These measures will be crucial in providing trustees with the confidence needed to implement the new flexibility whilst ensuring pension scheme members remain protected, experts claim.

LCP partner Steve Hodder welcomed Labour's initiative, stating: "It is very welcome that the government is looking seriously at allowing greater flexibility for well-funded DB pension schemes."

The investment expert noted the schemes' potential to support both members and the UK economy. Hodder suggested that a "100 per cent underpin from the Pension Protection Fund" could ensure all well-funded schemes access these new freedoms.

He stressed the urgency of Government action, warning that "time is of the essence" to avoid missing this opportunity.

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The Prime Minister said: "The number one mission of my Government is to secure growth, drive higher living standards for everyone, and get more money into people’s pockets.

"To achieve the change our country needs requires nothing short of rewiring the economy. It needs creative reform, the removal of hurdles, and unrelenting focus. Whether it’s how public services are run, regulation or pension rules, my Government will not accept the status quo.

"Today’s changes will unlock billions of investment, pushing forward in delivering my Plan for Change."

Reeves added: "I know this Government and businesses are united on growth being the top priority for our economy, which is why I am fighting every day to tear down the biggest barriers to growth, taking on regulators, planning processes and opposition to this urgent mission."