My next door neighbour in Blackfriars has written to the FT. He’s close enough to Bracken House to have hand delivered it on foot!
Here’s what Jos has to say
I read with interest the recent article highlighting surpluses in UK defined benefit pension schemes, and how these surpluses might be used by employers or members (Report, July 7).
There is another stakeholder in the mix: the government.
If surplus assets are released, the government can expect to receive 25 per cent in tax. The size of this opportunity — potentially tens of billions of pounds — gives policymakers a clear incentive to make surplus release easier and more attractive, even aside from the wider economic benefits.
One principle is non-negotiable: these schemes exist to pay their members’ pensions. Surplus assets should only be released if these pensions are secure. Thankfully, more than at any point in their history, the surpluses in these schemes are largely backed by UK government bonds, generally regarded as the safest assets available.
One way to fully reassure trustees considering surplus release would be to strengthen the safety net. For example, the Pension Protection Fund could offer full backing for defined benefit schemes if their sponsor fails.
This would be a step-change in the UK pensions framework. But if it helped unlock surplus assets while also reassuring trustees and members of pension security, the benefits could be considerable: for members, sponsors, the government and the wider economy.
It could also help unlock more of the productive investment the government is seeking.
Jos Vermeulen Head of Solution Design, Insight Investment, London EC4V, UK