DWP papers raise doubts over £160 billion surplus | U.Ok.Finance News
Hopes of a multi-billion pound pensions windfall to drive growth and raise incomes for retirees have been dealt a severe blow.Official figures contained in DWP papers show simply a tiny fraction of the touted £160 billion of surpluses held in personal office pensions may very well be unlocked.Labour’s chancellor, Rachel Reeves, had pinned half of her financial strategy on reforms to permit companies to dip into ‘trapped’ surpluses in conventional remaining wage pension schemes.In concept the money could be used to invest within the companies or increase pensions paid to scheme members.But Department for Work and Pensions (DWP) figures recommend these reforms will free up solely £8.4 billion over the following decade – or simply £957 million a yr. Some years, the determine might fall as low as £153 million.This compares with the staggering £160 billion that Reeves and Sir Keir Starmer claimed in January was sitting idle in pension funds and will – doubtlessly – be redirected into the financial system or used to spice up staff’ retirement pots.Pensions knowledgeable John Ralfe, writing for Pension Insurance Corporation, poured cold water on such hopes.He warned: “Forget about £160 billion of pension surpluses just waiting to be paid out ‘to drive growth and boost working people’s pension pots’.”The DWP figures estimate just a fraction of this, mainly because most companies want a full buyout with an insurance company.”The sobering figures from the DWP come in an impact assessment report published alongside the new Pension Schemes Bill, which the government claims will deliver ‘better outcomes’ for both businesses and savers.According to the DWP, the modest £8.4 billion in surplus withdrawals will be split down the middle – with £4.2 billion going to employers and the rest to pensioners via higher payouts.But some experts are sceptical that firms will use the funds to invest in growth or increase pensions.Schroders and Aberdeen, two major employers already applying to access surpluses, are not proposing to channel the money into extra investment or pension increases.Many companies, it appears, would rather use any surplus cash to pay to offload pension liabilities to outside insurers in order to end their long-term obligations.This cautious approach may be driven by fears of future market volatility. At the same time, it is believed that trustees, who are responsible for protecting members’ interests, are likely to resist letting too much money leave the schemes.A Downing Street statement in January had claimed: “Approximately 75% of [defined benefit pension] schemes are currently in surplus, worth £160 billion, but restrictions have meant that businesses have struggled to invest them.”Defined benefit pension schemes, now largely closed to new staff, cowl round 9 million people and maintain £1.2 trillion in belongings. Most personal sector staff at the moment are enrolled in much less beneficiant outlined contribution schemes.A authorities spokesman insisted the reforms would nonetheless ship advantages, saying: “Our proposals will unlock funds to boost the economy, remove barriers to growth and ensure working people and businesses are able to benefit from the opportunity these assets bring.”
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