Accessing final salary pension surpluses: are retiree's funds safe?

Chancellor unveils plans to allow companies to access pension funds, but critics warn it could put retirements at risk.

Companies are to be allowed to access the surplus cash in their final salary scheme pensions in a bid to boost the Treasury’s income. 

Under the plan, companies would be allowed to use the cash to reinvest in their businesses, distribute to shareholders or make investments. 

According to the Telegraph newspaper, consultants at pensions adviser Hymans Robertson claim UK Defined Benefit pension schemes currently boast a £160 billion surplus.

The Chancellor is to charge a 25% fee for companies seeking to access surplus funds.

It’s estimated that the move could raise £40 billion for the Treasury, which could help Rachel Reeves avoid breaking her current fiscal rules. 

Loosening the rules

Companies are technically already allowed to access final salary scheme surpluses, but only in rare circumstances, in order to protect pensions from risky investments. 

“Many Defined Benefit pension schemes are better funded than at any point in recent history – with around 80% of schemes fully funded,” Nausicaa Delfas, chief executive of the Pensions Regulator, told the Telegraph. 

“Our priority must be to ensure pension scheme members have the best chance of receiving their promised benefits. 

“Where schemes are fully funded and there are protections in place for members, we support efforts to help trustees and employers consider how to safely release surplus if it can improve member benefits and or unlock investment in the wider economy.”

Protecting pensions must be priority

However, in recent years, some high-profile Defined Benefit pension schemes, such as BT’s, have been in deficit. 

Plus, older readers may remember how disgraced former Mirror owner Robert Maxwell was able to take millions from the Mirror pension scheme because of the inadequate protections in place. 

As such, other experts warn that accessing pension surpluses could be risky, especially given the recent volatility of the global stock markets following US President Trump’s erratic tariff programme. 

“Most commentators have been fixated on how this surplus is going to be funnelled into building UK reservoirs and bridges, but they’ve missed a more immediate benefit the Chancellor is targeting – tax revenue,” Stephen Lowe, communications director at the retirement specialist Just Group, told the Telegraph. 

“For every £10 billion of pension funds surplus extracted, £2.5 billion goes straight into the Treasury’s bank account. 

“So, whether firms use their surplus to pay shareholders more dividends, invest in the business or possibly build a new piece of UK infrastructure, the Chancellor wins by raising more tax.

“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.

“The turbulent investment environment witnessed in the last week is a stark reminder that putting pension money in higher-risk assets can be a dangerous pursuit.”