Today we published our response to the Department for Work and Pensions’ () call for evidence on Options for Defined Benefit (DB) Schemes. While we the growing interest in the future of DB schemes and the , our focus continues to be delivering for our members and levy payers.
The call for evidence follows on from the Chancellor’s Mansion House Reforms in July and seeks input on how DB pension schemes, and the PPF, could support greater productive investment in the UK.
We’ve provided our views on how the current system could be improved for members of DB schemes, their sponsoring organisations and the wider economy.
Our response highlights that the current framework doesn’t support DB schemes to substantially increase their allocations to productive finance assets. These are investments – such as in infrastructure, private equity and private credit – which better support British businesses and the wider UK economy. To achieve the government’s aim at scale, fundamental changes to DB investment objectives will be needed.
Its ambitions can be achieved through consolidating schemes together in a Public Sector Consolidator. A consolidator, able to invest for growth over time with professional investment management, would lead to greater productive finance allocations while providing security for members.
In our response, we’ve set out how a Public Sector Consolidator could be set up and that we’d be well placed to take on this additional and separate function should this be the government’s preferred solution.
Kate Jones, our Chair, said “With almost £1.5 trillion in invested assets, defined benefit schemes could play a major role driving greater productive investment in the UK economy whilst securing good member outcomes. However, this is unlikely to happen under the current framework – a step change will be needed in the DB market to deliver this.”
Oliver Morley, our CEO, said “To achieve the government’s goals at scale, including driving a material change in DB allocations to productive investment, consolidation must be an integral part of the solution. We believe the Public Sector Consolidator option could substantially deliver against the government's objectives, complementing existing commercial solutions, and we’d be well placed to run such a Fund.
“Running a Public Sector Consolidator would be a natural evolution of the PPF’s existing capabilities. Through our investment approach the PPF already provides a blueprint for how the government’s objectives can be delivered at scale. We’re a major buyer of UK gilts, invest heavily in productive assets and, by investing for growth over the long term, we’ve delivered greater security for our members.”
We’ll engage further with government and industry on this call for evidence over the coming months, and will continue to deliver on our existing role for our current members and levy payers.
Read our full response to the call for evidence.