IPE UK Briefing: Pension Schemes Bill

The Department for Work and Pensions (DWP) has launched the long-awaited UK Pension Schemes Bill in Parliament today.

The bill aims to transform the £2trn (€3.6trn) pensions industry to ensure savers receive good returns for each pound they save, and drive investment into the economy, through a suite of measures including creating defined contribution (DC) megafunds with at least £25bn of assets in their main default arrangement and consolidating small pension pots.

For defined benefit (DB) schemes, the bill will allow trustees to release surplus back to employers and their scheme members and legislate superfunds to encourage the growth of superfund market and underpin the security of members’ benefits.

The bill will also remove restrictions that prevent the Pension Protection Fund (PPF) from reducing the levy it collects to zero.

The bill will also introduce a Value for Money (VFM) framework and implement a default pension benefit solution.

The Pension Scheme Bill was shaped by the Pensions Investment Review and the final report which was published earlier this month, which revealed the Pensions Schemes Bill would include a ‘reserve power’ that would, if necessary, enable the government to set quantitative baseline targets for pension schemes to invest in a broader range of private assets, including the UK.

Mansion House Accord

The news was particularly disappointing after the launch of the Mansion House Accord, which has secured commitment from 17 of the largest workplace pension providers in the UK to invest 10% of their DC default funds into private markets by 2030, with 5% of the total allocated to the UK.

The voluntary initiative has been jointly led by the Association of British Insurers (ABI), the Pensions and Lifetime Savings Association (PLSA) and the City of London Corporation. It is aimed at securing better financial outcomes for DC savers through the higher potential net returns available in private markets, as well as boosting investment in the UK.

Signatories to the new commitment include: LifeSight, NOW: Pensions, Royal London, The People’s Pension, SEI, TPT Retirement Solutions and the Universities Superannuation Scheme (USS). They joined the previous Compact signatories Aviva, Legal & General, Aegon UK, Phoenix Group, NEST, Smart Pension, M&G, Mercer, Aon and NatWest Cushon. 

Scottish Widows was an original signatory of the Compact but has not signed up to the Accord.

DB surplus extraction

Separately, the DWP has published its response to the ‘Options For DB schemes’ consultation, which was launched under the Conservative government to explore new measures such as surplus extraction and a public sector consolidator run by the Pension Protection Fund (PPF).  

In its response, the government said it would give trustees power to modify their scheme rules to allow surplus extraction at their discretion, as trustees “remain best placed to make decisions in the context of their individual scheme circumstances and their duties to scheme beneficiaries”.

British Growth Partnership

Earlier this month, the Financial Conduct Authority granted regulatory approval to British Business Bank’s third-party arm BBB Investment Services, which was branded an important first regulatory step in the preparation for the launch of the British Growth Partnership, an initiative aimed at encouraging more UK pension fund and other institutional investment into innovative young UK companies. 

Last week London CIV has announced its intention to work with the British Business Bank on the launch of the British Growth Partnership. The local government pension scheme (LGPS) said it recognises the investment opportunity to support early-stage UK growth companies and as such was looking at a range of funds looking to raise capital to invest in the UK.

Items to note:

• The IPE Transition Conference & Awards 2025 is taking place on 17 June at the Cardo Brussels in Belgium

Pamela Kokoszka

UK Correspondent