There’s been a lot of discussion recently in the general and specialist pensions media about government plans to make it easier for Defined Benefit fund sponsors – the employers — to access what some in the pensions industry call “trapped surpluses,” which many DB schemes have built up in recent years.
In their pursuit of growth, the government wants to encourage sponsor companies to invest their pension surpluses, or at least part of them, to boost the UK economy. This could involve fund sponsors investing surpluses in their own companies, with the inducement being a reduction in tax paid on these surpluses to 25 pct from 35 pct
For all Defined Benefit fund members there is also an important potential gain because a surplus, or part of it, could be used to increase the pensions of both existing and future pensioners. For example, it might be possible to use the RPF surplus to compensate for the non-indexation of pre-1997 benefits. The RPF surplus was £133 million as at 30 June last year, according to the latest Update.
The draft Pension Schemes Bill will be sent to Parliament before the summer recess starts on July 22, but there is unlikely to be any meaningful discussion of its contents until September at the earliest. The Pension Review Group will be keeping a close eye on developments.