Final pensions investment review report due in spring

14 February 2025

The final report from the government’s Pensions Investment Review is scheduled for release this spring, Chancellor Rachel Reeves has announced. 

The report follows consultations on her “big bang of reforms”, which aim to reshape the UK pensions landscape and promote economic growth.

Speaking at the end of January about economic growth, Reeves reiterated plans for pension fund consolidation, which she said could create larger funds capable of significant investment in high-growth UK businesses.

She confirmed: “The consultation on these reforms is already complete, and the final report will be published in the spring.”

New flexibilities for DB schemes

Reeves highlighted additional plans to allow well-funded defined benefit (DB) pension schemes to release surplus funds safely. 

“We will introduce new flexibilities for well-funded defined benefit schemes to release surplus funds, where it is safe to do so, generating even more investment into some of our fastest-growing industries,” she said.

However, she stressed the importance of “protecting the important role that pension funds play in the gilts market”, addressing concerns raised by experts over potential impacts on government borrowing costs if DB schemes offload gilts.

A defined benefit (final salary) scheme is a type of workplace pension that typically pays a pension income based on your years of service and your salary level. This differs from a defined contribution (DC) pension scheme where you use your pension savings to set up an income, such as with an annuity or drawdown plan.

Industry reactions

The industry’s response to the proposals has been cautiously optimistic. Calum Cooper, partner at Hymans Robertson, welcomed the plans as a bold move to stimulate economic growth but emphasised that changes must prioritise pensioners. 

He said: “We encourage the government to continue to be bold and creative and think about how Phase 2 of the delayed Pensions Review can reduce our tax burden and further stimulate sustainable growth and better pensions: it can be done.”

Tom Froggett, senior consultant at XPS Group, estimated that the DB surplus flexibilities could unlock up to £100bn of value over the next decade. However, he cautioned, “The key focus now shifts to how the government will implement this safely and effectively. 

“In our view, there are two key elements to this - first, a statutory override to provide the ability for surplus to be released subject to certain safeguards, and second, clear regulatory guidance to provide trustees with a blueprint for running DB schemes on to build and use surplus safely.”

Addressing trustee concerns

Experts also highlighted the challenges in implementing these changes effectively. Gareth Henty, head of pensions at PwC, noted the importance of addressing pension scheme trustee concerns about future funding risks. He stated: “The big question is whether, in pursuit of economic growth, the government or Pension Protection Fund (PPF) can underpin or provide any support for taking that risk.”

As the final report approaches, the industry will be watching closely to see how these proposals are translated into actionable policies that balance economic growth with pension security.

Source

Final report from the government’s Pensions Investment Review is scheduled for release this spring: Final Pensions Investment Review report on track for spring. Pensions Age. Accessed 10 February 2025.