The Pensions Regulator could play a key part in driving the government’s growth agenda through reform of DB funding, according to LCP.
The comments come as leaders of the UK’s main economic regulators are due to be called to Downing Street to discuss how they can contribute to the government’s drive to boost economic growth in the UK, and are expected to give in-person presentations to the Chancellor on Thursday.
LCP partner David Wrigley said that in the past TPR has been criticised for imposing an overly cautious funding regime on DB schemes, 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, analysis by LCP shows that with many schemes now in surplus, there is the opportunity to promote sustainable growth.
LCP says that rather than being primarily about the way funds are invested within DB schemes, regulation could focus 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 or using extracted funds to fund greater investment in the business.
Wrigley adds:“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”.
