Pensions - Articles - TPR could play leading role promoting sustainable growth

 Before Christmas, regulators received a letter asking them to set out how they could contribute to the Government’s drive to boost economic growth, and they are expected to make in-person presentations to the Chancellor on Thursday.

 In the past, TPR has been criticised by some for imposing an overly cautious funding regime on Defined Benefit pension scheme, forcing them to de-risk and move out of what are now seen as more ‘productive’ assets in favour of a lower-risk investment strategy.

 However, according to analysis by LCP, with many DB schemes now in surplus, there is a new opportunity to promote sustainable growth. Rather than being primarily about the way funds are invested within DB schemes, this would be focused on a responsible framework for extracting surplus funds to be used by employers in a range of ways to promote growth. This could include funding increased recruitment, improved real wages, contributing into the DC pensions of the current workforce and/or using extracted funds to fund greater investment in the business.

 Commenting, LCP partner David Wrigley said: “For a long time the debate about the productive use of DB assets has focused on the investment mix within the scheme. But with more and more schemes now in surplus, the economy could also benefit if some of these surplus funds could be extracted and invested by the businesses themselves. It is nearly a year since the last Government published a consultation on ideas for making the best use of over £1 trillion in DB assets. The new Government should respond to that consultation urgently by legislating for ongoing access to surpluses in well-funded DB schemes provided this is done in a responsible way. TPR could support this by working swiftly to produce a regulatory framework within which this could take place”.