Government launches consultation into pension ‘superfunds’ for DB schemes

A CONSULTATION into pension “superfunds” which could give savers more secure retirement incomes has been launched by the Government.

A superfund is for closed defined benefit (DB) pension schemes – such as final salary pensions – and could help these schemes to be run more efficiently.

DB schemes promise savers a certain level of payout when they retire, but firms have found them increasingly expensive to run as people live for longer. A significant proportion of them have remained in deficit over the last decade, despite cash injections to fill pensions black holes.

While the outlook for most schemes is positive, in that members can expect to receive the pensions promised, there are some where the outlook is much more uncertain, according to the consultation document.

It said that superfunds would offer benefits of scale and were likely to be able to access a wider and potentially more innovative mix of investment opportunities.

But the Government wants to make sure the Pensions Regulator can help protect scheme members from excessive risk.

Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, welcomed the consultation.

“The UK is unusual in having large numbers of small company pension funds, some of which may struggle to meet their pension promises,” he said.

“Combining schemes into a much smaller number of superfunds could make the process much more efficient and improve the chance that pensions will actually be paid.

“Whilst the Government needs to make sure that such schemes are well run and well overseen, they offer a game-changing opportunity to improve the security of people’s pensions and should be encouraged.”

The consultation period runs until February 1, 2019 and applies to Great Britain. It is envisaged that Northern Ireland will make corresponding regulations.