LONDON (Reuters) -Britain is considering proposals to reduce the amount that pension schemes have to pay into an industry-wide bailout fund, the government said on Thursday, as it searches for new ways to free up cash for investment in the economy.
The Pension Protection Fund (PPF) charges a levy on corporate schemes to build up a pot of money which can be used to protect employees from losses if individual schemes run into trouble.
The government said the PPF was in a strong financial position and that it was considering ways to allow the levy to be reduced more easily. The changes could free up millions of pounds, it said, without giving a more specific figure.
“It is time to change outdated rules that would force the PPF to levy pension schemes unnecessarily,” pensions minister Torsten Bell said in a statement.
“This will free up funds that allow pension schemes or employers to invest, supporting savers and growth.”
Thursday’s proposal adds to measures announced by the Labour government since it took office in July which seek to unlock money in the pensions system that could be used to raise the country’s levels of private investment.
The government, caught between tight public finances and self-imposed borrowing limits, is relying heavily on the private sector to invest in new projects and drive an improvement in Britain’s low growth rate.
“Given the PPF’s growing surplus we welcome the recognition by them, and the Government, that the time is now right to reduce the money collected from pension schemes,” said a spokesperson for the Universities Superannuation Scheme, one of Britain’s biggest pension funds.
“We encourage the Government to speedily bring forward the legislative changes needed to support the PPF decision.”
The country’s rate of business investment, despite improving slightly in the last couple of years, still lags behind its major international peers, according to OECD data.
Earlier this week, finance minister Rachel Reeves announced reforms she hopes would release up to 100 billion pounds ($124 billion) from pensions funds, and last year announced a sweeping consolidation across certain funds to make them more cost-efficient.
As of 31 March 2024, the PPF had reserves of more than 13.2 billion pounds, actuarial liabilities of 18.8 billion and 32.1 billion in assets under management, the government said.
($1 = 0.8047 pounds)
(Reporting by William James, additional reporting by Muvija M, Andy Bruce and Sinead Cruise, Editing by Hugh Lawson)
