The Pensions Regulator (TPR) should seize a new opportunity to promote sustainable economic growth in the UK by laying out rules for how surplus from well-funded defined benefit (DB) schemes could be extracted, according to consultancy LCP.

Leaders of the UK’s main economic regulators are due to meet with the Chancellor on Thursday to explain how they will contribute to the government’s growth agenda.

According to consultancy LCP, TPR should be setting out how it could contribute to allowing DB schemes’ surplus funds to be used by employers to promote growth.

This could include funding increased recruitment, improved real wages, contributing into the defined contribution pensions of the current workforce and/or using extracted funds to fund greater investment in the business.

As noted by LCP, in the past TPR has been criticised by some for imposing an overly cautious funding regime on DB pension plans, forcing them to de-risk and move out of what are now seen as more “productive” assets in favour of a lower-risk investment strategy.

“For a long time the debate about the productive use of DB assets has focused on the investment mix within the scheme,” said LCP partner David Wrigley.

“But with more and more schemes now in surplus, the economy could also benefit if some of these surplus funds could be extracted and invested by the businesses themselves.”

Last year the last UK government published a consultation on how money held in DB schemes can be best unlocked in the interest of savers and for sustainable investment in the wider economy.

LCP’s Wrigley said the new, Labour government should respond to that consultation “urgently” by legislating for ongoing access to surpluses in well-funded DB schemes “provided this is done in a responsible way”.

“TPR could support this by working swiftly to produce a regulatory framework within which this could take place,” he said.

In her first annual address, Chancellor of the exchequer Rachel Reeves announced what she described as the biggest pensions reform in decades, but pensions industry commentators branded the lack of DB reform plans a “missed opportunity”.

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Susanna is deputy news editor at IPE. At IPE she covers responsible investment and EU regulation, but also enjoys reporting on developments in and around the UK pensions industry. Having been a financial journalist since 2008, Susanna started her career as a corporate governance/corporate social responsibility analyst at proxy advisory firm PIRC.View full Profile

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