Nationalisation or pension partnership?

This blog sides with the Government in its intentions for better pensions and a better Britain. I do not see the Pensions Investment Review as nationalisation but of partnership which brings the voice of silent tax-payers to the table. It makes extensive use of Hymans recent paper but recognises concerns from David Fairs, John Hamilton and others that this is a “slippery slope”. It is , IMO, a move to partnership not nationalisation.

First the politics – let’s air it and get beyond it

In the press release that accompanies the Government’s response to the Pension Investment Review’s findings, there is a clear signal to anyone interested, that this is a Government , not just a DWP response. This is a response from Government

I’ve listened to Guy Opperman, the longstanding Pension Minister under a Conservative Government. I can’t remember any publication that came from the DWP about pensions that was fronted by him or backed by the Government in this way. I mentioned that Torsten Bell said he spoke for the Chancellor and Prime Minister when he spoke to the PLSA in Edinburgh.

The reality is that the Conservative Government did very little to advance pensions beyond widening saving through AE. What we have in the Pension Investment Review is a set of proposals , drawn up by Jo Gibson (formerly DWP now HMT), with the backing of Rayner and Reeve and the foreword of a leading political thinker who is (for now) pension minister.

There is powerful opposition to the proposals, not so much to mega-funds but more to Government intervention in the investment of private and public funded pensions.

In a perfect world, there would be harmony over Government initiatives but there is not harmony over the Government’s intentions and it is capturing the professional pension headlines.

David was head of policy at TPR, he has been Britain’s spokesperson for consulting actuaries and he is now a Partner at LCP, he is not to be ignored or confronted over his views.

My comments are simple, pensions are where they are thanks to investment not just by employers and savers but from the tax office.

We take with one hand but are reluctant to invest with another.

The Government is coming to the table and asking that pensions help the country and the tax-office/payer to meet the bills. We must play our part in this partnership, if it means investing in our nation’s enterprise, pensions should see it as a partnership not intervention (bordering on nationalisation).

Two different views “nationalisation or partnership”?

I think there are two objections at work here but that they are different. There are those, such as David Fairs who see the Government’s intention to backstop its call for greater investment in the UK and UK private markets as nationalisation of pension trusteeship.

There is another complaint , which is that Government should be looking to reorganise the delivery of pensions by making more of what we have. John Hamilton is concerned that Government is being political and ignoring the good ideas that he and Hymans Robertson have been putting forward. Here are the ideas on pages 13-14 of Hymans “pension’s untapped” paper to which John refers.

28032025_Untapped potential of pensions (1).pdf from Henry Tapper

Creating a national CDC system (a funded SERPS)

The first is to create a funded second pension for everyone, this idea is openly floated by Andrew Young and has merit

To encourage saving into CDC schemes, we need
incentives that give certainty, accessibility and
affordability.

The Pension Protection Fund (PPF) has a surplus of £13bn.
It could use 3% of this surplus to introduce a ‘lifetime CDC’
scheme

This is not getting momentum yet but there are mentions several times in the Pension Investment Review to other initiatives that will kick off from the Pension Bill and later in the decade when reviews of how VFM and CDC have progressed (in other parts of the pension world – explicitly changes to workplace pensions).

Using pension surplus to grow companies and our retirement income

The second is to liberate money contributed into DB pensions , not as investment but as deficit payments during the years when gilt yields and so pension valuations were artificially depressed. The call of Hymans Robertson is for employers to get money back to grow businesses to pay higher wages and improve retirement income.

In short to reward employers who have stuck it out and have an invested pension scheme in profit or potentially in profit.

Government not nationalising but working in partnership

Government is taking this initiative seriously, Jo Gibson wrote it from the Treasury and Rayner, Reeve and Bell have laid it before the press , this is not backwater stuff.

28_05_2025_Government_Response_Unlocking_the_UK_Pensions_Market_for_Growth.pdf from Henry Tapper

I cannot say I have read the entire response from the Government , but my take on the Government’s plans for DB pensions seem much more in line what this blog and more actuarially , Hymans’ paper has been calling for.

I hope this column from Hymans’ Calum Cooper and comments from many others will come to the fore and that the doubts that David Fairs

What a day for the future of DB pensions. 👇

The government published its response to the Options for DB consultation. Top headlines:

1. Barriers for surplus sharing will be removed, while maintaining safeguards to protect members. A statutory resolution power for trustees will be introduced to modify their scheme rules.

2. On when trustees can share surplus – the government is “minded to amend the threshold from the current buyout threshold to a threshold set at full funding on the low dependency funding basis”.

In combination, this could gradually release £400bn of productive capital as Sachin Patel outlines …

There is plenty of detail to be worked through but this is a watershed moment for DB pensions schemes.

Always risky to look back… at a wish list below…. but it looks like the essential elements have been granted! Kudos on that to the many conversations with awesome, forward thinking people in the industry, and to the listeners who make change happen.

💰 DB pension funds are sitting on £160bn surplus capital. As our first wish for 2025, Rt Hon Rachel Reeves is boldly pushing reforms to keep pensions safe while freeing up capital to drive economic growth. Done well, a win-win in the making.

To really make this happen, there needs to be (at least!) three things: (1) a mutual statutory override, (2) smart incentives and (3) confidence building regulatory steer.

And on on the detail, if I ruled the world… (yes, happily I don’t!):

🔹 Set the regulatory perimeter to encourage responsible innovation — the existing funding code checks if schemes are well-funded and invested sensibly. That’s a sound minimum bar for sharing surplus. Whether and when you should share is different!

🔹 The PPF is the DB safety net and it’s coverage gets better with time. And there’s £13bn surplus, some of which could enhance protection whilst avoiding the moral hazard of full protection, if this is necessary to stimulate productive investment.

🔹 Investing for growth. Once beyond fast track funding, schemes will have plenty of room to invest — emerging surplus acting as a shock absorber. Even +2% p.a. more into growth assets would transform the dial by £100bs towards an economically productive future for DB.

🔹 Surplus sharing—within clear guardrails. It should be by mutual consent of trustees and employers, and with professional oversight within the boundaries of solid funding and a robust PPF. No single “right” answer—just the right risk appetite and intergenerational balance.

🔹 In time I’ll wager we’ll see companies starting to size up DB pensions as an asset in practice, notwithstanding that this doesn’t always work in theory.

What about contingency plans?

I think we’ll see more third-party capital solutions emerging to deliver run on as a service as well as providing a secure Plan B for those who wish to pivot to insurance in the future. Happily we already have the first UK superfund Clara-Pensions up and running today.

When we look back, will 2025 be the year we re-kindled DB pensions innovation and got the UKs legacy of pension capital working harder for people, enterprise and planet? 🚀

Pensions in partnership – not under threat of nationalisation. I am with Calum and not with David, optimistic about the Pensions Investment Review and the Bill and Act that comes next.

1 Response to Nationalisation or pension partnership?

Derek Benstead says:

May 30, 2025 at 7.32

Using pension scheme surplus for more productive investment is a pifflingly small ambition. A collectively invested pension scheme which is open to new entrants is capable of investing most of its assets in long term productive investment. There is a dearth of pension (as opposed to pot) provision in the private sector. If a pension scheme is not open to new entrants there’s been a failure (probably falling on many parties) to find a good solution.

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