Working people and businesses are set to benefit from new rules that will give more flexibility over how occupational defined benefit pension schemes are managed, according to the UK government.

At a meeting hosted in London on January 28, 2025, leaders of Britain’s biggest businesses gathered to hear Keir Starmer, the prime minister (PM), and Rachel Reeves, the chancellor of the exchequer, set out the details of the changes.

At the roundtable, the PM and chancellor outlined how restrictions will be lifted on how well-funded, occupational defined benefit pension funds that are performing well will be able to invest their surplus funds.

This follows action taken by the government to bring a renewed focus on growth from some of the UK’s biggest regulators, a shake-up to legal challenges on planning applications, and new “brownfield passports” to speed up housing in commuter hotspots.

Keir said, “The number one mission of my government is to secure growth, drive higher living standards for everyone, and get more money into people’s pockets.

“To achieve the change our country needs requires nothing short of rewiring the economy. It needs creative reform, the removal of hurdles, and unrelenting focus. Whether it’s how public services are run, regulation or pension rules, my government will not accept the status quo. The changes will unlock billions of investment, pushing forward in delivering my ‘Plan for Change’.”

Keir and Rachel promised to work in partnership with businesses to deliver high-quality jobs across the country and the economic growth that will fund public services.

Pension trustees and the sponsoring employers could then use this money to increase the productivity of their businesses – to boost wages and drive growth or unlock more money for pension scheme members.

Rachel commented, “I know this government and businesses are united on growth being the top priority for our economy, which is why I am fighting every day to tear down the biggest barriers to growth, taking on regulators, planning processes and opposition to this urgent mission.”

Where trustees agree to share a portion of scheme surplus with a sponsoring employer, the employer may choose to invest these funds in their core business, for example, to purchase equipment or supplies and/or provide additional benefits to pension scheme members.

Approximately 75 per cent of schemes are currently in surplus, worth £160bn, but restrictions have meant that businesses have struggled to invest them.

These reforms build on the chancellor’s Mansion House reforms, which will create pension megafunds as part of the biggest set of pension reforms in decades, unlocking billions of pounds of investment in new businesses, infrastructure, and local projects.

Over £1.1tr is held by pension funds in the UK and defined contribution pension schemes are set to manage £800bn worth of assets by the end of the decade. The government has said it is determined to encourage these pension funds to deliver.

Patrick Heath-Lay, CEO of The People’s Pension, said, “It is positive news to see the government is looking at the pension industry as a whole. This will help unlock more of the £2.9trillion that is held in UK pension savings, to benefit savers and the economy alike.”

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