If you are retirement planning in Cheshire, the Government is looking at easing restrictions in how certain pension schemes are managed, as part of its commitment to driving economic growth.
According to the Treasury, this overhaul is necessary because defined pension schemes currently have a surplus of £160 billion, but are largely locked and unable to be invested in the greater economy under current rules.
Defined benefit pensions, or final salary schemes, are directly related to someone’s salary and their length of employment service. At present, around 75% of the funds that pay such pensions are in surplus, meaning they have a surfeit of cash to hand.
The proposals come on the heels of the Chancellor of the Exchequer’s decision last year to create pension “megafunds”, by merging 86 council schemes across the UK. This is an idea that has been inspired by similar policies in Australia and Canada.
These schemes collectively hold around £400 billion of assets, and the government has indicated that selected pension schemes will need to reach a certain size, making them cheaper to operate and thereby more easily investible in national infrastructure projects.
The Pensions Regulator said that it endorsed fully funded schemes with protection in place for members. It added that there should be efforts to help employers and trustees establish how to release surplus funds into the broader economy.
For several years, the pensions industry, represented by the Pensions and Lifetime Savings Association, has been lobbying successive governments to introduce surplus release in the UK.
