Working people, pension scheme members and businesses are set to
benefit from record highs in pension scheme funding.
The majority of DB schemes
are now running at a surplus which means the value of their
assets exceed that of the promised pension benefits due to
members.
Thanks to the forthcoming Pension Schemes Bill – trustees and
employers will soon be able to safely release part of this
surplus to boost investment and benefit scheme members.
Funding levels for DB
pension schemes, sometimes known as “Final Salary” pensions, are
current in their strongest ever financial position with the
number of DB schemes
sufficiently financed tripling since 2010.
Minister for Pensions, , said:
The record funding levels for Defined Benefit pension schemes is
excellent news for Britain's employers and workers.
Fast falling deficit payments offer employers a cashflow boost of
over £10 billion a year, that can support higher wages and
investment.
And growing scheme surpluses can also be used productively.
Currently some trustees are held back from sharing the benefits
of a surplus, but our plans will allow all schemes to safely do
so, delivering greater investment across firms and benefits for
savers.
In 2019, just 600 Defined Benefit schemes were financed
sufficiently, meaning businesses could meet the costs associated
with their schemes without dipping into operational budgets – by
2024 that figure had tripled to over 1,800.
Because of this robust financial position, the additional
payments businesses have had to pay to plug pension deficits has
fallen from £16 billion in 2010 to under £5 billion in
2024. This is delivering an immediate cashflow benefit to
firms and should support higher levels of investment and
wages.
The funding position of schemes in deficit has improved
significantly, from a collective deficit of £500bn in 2019 to a
deficit of just £140bn in 2024. Schemes running at a surplus have
seen their collective surplus now rise to more than
£160bn. Currently, many schemes cannot access their surplus
– but the forthcoming Pension Schemes Bill will allow Pension
trustees and the sponsoring employers to safely release some
surplus to invest back into their businesses and unlock more
money for pension scheme members. The upcoming changes will focus
on member protection, and trustees will continue to be required
to fulfil their duties towards scheme beneficiaries.
These changes form part of a package of reforms in the upcoming
Pension Schemes Bill that will secure the financial future of
millions of UK savers and drive long-term economic prosperity.
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