The UK government, led by Chancellor Rachel Reeves, is proposing reforms that would allow companies to access surplus funds from pension schemes. The plan aims to boost Treasury revenues and channel pension wealth into national priorities, potentially raising £40 billion for the Exchequer. Under the proposed changes, companies would be able to withdraw surplus funds from pension schemes, subject to a 25% tax charge.
Consultants estimate that about £160 billion could be available for drawdown across the UK’s defined benefit schemes. Nausicaa Delfas, chief executive of The Pensions Regulator, expressed support for cautious efforts to release pension surplus funds, provided member benefits are safeguarded.
Accessing pension surplus funds
She noted that approximately 80% of defined benefit schemes are fully funded. However, critics warn that the move could jeopardize pensioners’ incomes. Stephen Lowe, director at Just Group, argued that drawing down surpluses prematurely or shifting towards higher-risk investments could compromise the security of pension promises.
“Every £10 billion withdrawn could net £2.5 billion in tax revenue,” Lowe said, stressing that protecting pensions should be the first priority. “Extracting surplus and making riskier investments before pensions have been guaranteed could lead to less money in the scheme and thus endanger retirements.”
A recent survey indicated that 60% of defined benefit pension members fear the proposed changes could compromise their retirement benefits. The Treasury is expected to present final details of the plan in the coming weeks.
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