“Reeves plans £160 billion business boost by changing pension fund rules”

Jan 28, 2025 | Pensions

An independent (financial adviser’s) view

And why were the rules on how and where pension funds can invest put in place? Because the amounts which many big final salary pension schemes were holding in shares meant that, when markets fell they fell into deficit Many then had to surrender themselves to the Pension Protection Fund, particularly if the employer was either bust or not able to add enough money to the fund to prop it up. Those final salary or defined benefit schemes have to demonstrate that they have enough in reserve to pay their current pensioners for the rest of their lives, as well as those who’ve left or not yet retired. To make sure they can do this, they currently have to hold guaranteed investments, government bonds, which will pay interest to cover the pension payments. Yes, many schemes now have surpluses, but that should be a good thing for the schemes and the pensioners whose incomes they’ve securing. The wrong investments will bring many a scheme running to the lifeboat again for a bailout. Lessons of history, and all that.

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