The Chancellor has been accused of “putting retirements at risk” with her latest move targeting pensioners.
Rachel Reeves has been accused of ‘putting pensions at risk’. (Image: Getty)
New government proposals could potentially put millions of defined benefit pension scheme members at risk. The plans would allow companies to dip into surplus pension funds, with a 25% tax charge applied to any withdrawals.
The proposal, set to be detailed this spring, is part of a broader initiative led by Chancellor Rachel Reeves to free up capital for investment in UK infrastructure and business, while also increasing Treasury revenues. Many defined benefit (DB) schemes are currently in surplus, with consultants at Hymans Robertson estimating that around £160 billion could be available for withdrawal. Under the proposed changes, companies would be able to access these surpluses, provided certain protections are in place for scheme members.
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Rachel Reeves urged to hike THREE taxes and slash pensions relief in all-out war on wealth
Experts called on the Government to better protect pensions. (Image: Getty)
Any withdrawals would be taxed at 25%, potentially generating £40billion for the Exchequer, according to The Telegraph.
Proponents of the plan argue that the reforms could help direct pension wealth towards national priorities, including investment and economic growth.
Nausicaa Delfas, chief executive of The Pensions Regulator, noted that approximately 80% of DB schemes are fully funded and said the regulator supports cautious efforts to release surplus funds where member benefits are safeguarded.
Stephen Lowe, director at Just Group, highlighted the dangers of tapping into pension surpluses too early or opting for higher-risk investments, which might undermine the stability of pension schemes.
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He told the outlet: “Every £10billion withdrawn could net £2.5billion in tax revenue,” pointing out that this approach seems to favour short-term fiscal benefits over the long-term security of pensioners.
“Protecting pensions must be the first priority of any pension scheme. Extracting surplus and making riskier investments, before pensions have been guaranteed, could lead to less money in the scheme and therefore put retirements at risk.”
According to a survey by the Pension Insurance Corporation, there is significant concern among DB pension members, with 60% fearing that the proposed changes may jeopardise their future retirement benefits.
