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\t\tThe government is counting on pension reform as part of their growth agenda.\t<\/p>\n
Government plans to allow companies to extract cash from final salary pension schemes<\/a> have come under fire after fresh analysis found the policy could put millions of retirees\u2019 savings at risk.<\/p>\n The Pension Schemes Bill, introduced last week, creates new rules allowing employers to remove \u201csurplus\u201d cash from defined benefits (DB) pension schemes, which are long-term retirement funds set up to pay former workers a guaranteed income.<\/p>\n But an impact assessment prepared by the Department for Work and Pensions (DWP) civil servants warns unlocking these funds comes with major risks as financial markets and economies change. <\/p>\n The Pension Security Alliance (PSA) have echoed concerns, saying \u201cplans pose a risk to the retirement incomes of millions of members of defined benefit pension schemes.\u201d<\/p>\n \u201cPension schemes are not a piggy-bank that politicians can dip into or a cash-cow for employers,\u201d the group said.<\/p>\n The group said the DWP\u2019s analysis was \u201cofficial confirmation that the government\u2019s plans could actually harm members. That can\u2019t be right.\u201d<\/p>\n Nine million people are estimated to be members of DB schemes. <\/p>\n The PSA warned that reforms would allow businesses to divert money meant for pensions into their own books, potentially leaving schemes falling short if conditions were to deteriorate.<\/p>\n DWP analysis said: \u201cSchemes may extract too much surplus. Schemes are currently benefiting from unusually high surpluses due to the macroeconomic environment.<\/p>\n \u201cAny major shocks paired with high surplus extraction levels, could lead to schemes becoming underfunded,\u201d the analysis said.<\/p>\n The DWP\u2019s assessment indicates the extra cash serves as a \u201cfinancial cushion\u201d in times of economic volatility to protect members if investment returns fall or unexpected liabilities rise.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tRachel Reeves to set \u2018binding\u2019 pensions allocations in megafunds launch<\/a><\/p>\n The PSA said: \u201cThe millions of people who are members and beneficiaries of defined benefit pension schemes are the most important stakeholder in this debate, but the Government has neither informed nor consulted them about a policy that its own officials say is a risk to their retirement incomes.\u00a0<\/p>\n \u201cIt is vital that politicians listen to the millions of people who rely on DB pensions schemes for a secure income in later life. It\u2019s wrong to put pensioners\u2019 incomes at risk like this.\u201d<\/p>\n Pension analysis blow to Reeves\u2019 growth agenda<\/p>\n This comes as ministers claim pension pots hold \u00a3160bn more than their estimated liabilities.<\/p>\n Chancellor Rachel Reeves had previously touted the surplus as a key pillar of her investment-led economic strategy.<\/p>\n But DWP analysis suggests just around \u00a311bn could be realistically extracted over a decade, as first reported by The Guardian.<\/a><\/p>\n This falls drastically short of the sum Reeves had hoped to strum up, dealing a crushing blow to the embattled Chancellor\u2019s growth agenda.<\/p>\n Reeves has laid out plans to shake up UK pensions including several government-backed mega funds to boost pension and wealth investment.<\/a><\/p>\n The government introduced a voluntary, non-binding agreement for pension funds, known as the Mansion House Compact,<\/a> encouraging increased investment in private markets \u2014 including infrastructure and venture capital \u2014 to support fast-growing UK businesses and the broader economy.<\/p>\n A government spokesperson said: \u201cThere are billions of pounds in surplus\u00a0funding currently in private sector Defined\u00a0Benefit (DB)\u00a0pension\u00a0schemes, with three in four schemes in their strongest funding position in decades.<\/p>\n \u201cOur 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.\u201d<\/p>\n \t\t\t\t\tRead more<\/p>\n