Turning pensions lifeboat into £400bn mega fund would save the UK economy, says Tony Blair’s think-tank
Thousands of public and private sector pension plans should be overhauled to create a £400bn “superfund”, new suggestions from Tony Blair’s think tank say.
In a paper released today, the Tony Blair Institute backs proposals to turn the Pension Protection Fund (PPF), a lifeboat scheme for the pension funds of firms that go bust, into the first of a number of new global scale schemes that will boost investment in Britain.
It said the UK’s pension-savings system is “long overdue for sweeping change” and claimed that merging retirement schemes into half a dozen superfunds will increase investment in businesses and infrastructure.
The paper is suggesting “a logical expansion” of the PPF to become this country’s first “superfund” called GB Savings One.
Under this plan, about 4,500 of the smallest final salary or “defined benefit”, schemes, where the amount you’re paid is based on how many years you’ve been a member of an employer’s scheme and the salary you’ve earned at the time you leave that employer or retire, would be offered the chance to merge with the PPF while retaining the terms offered to members.
If successful, the institute suggests this model could be replicated across the industry, with a string of new not-for-profit entities absorbing the remaining final salary schemes, 27,000 defined contribution schemes, local government retirement pots and public sector pension schemes.
This would create six larger schemes of between £300bn and £400bn in size within three to five years.
The institute said this would not only generate better, more secure returns for pensioners than the 5,200 existing defined benefit funds, but would also strengthen pensions for the entire generation stuck with inadequate provision since the closure of multiple funds over the past two decades.
The Treasury is already considering plans to turn the PPF into a major pension investor through a similar proposal and this suggestion will add to the debate into how the government could increase flagging investment in Britain.
Between 2001 and 2022, UK private-sector-pension-fund holdings of UK equities decreased from over 50 per cent of the average pension-fund portfolio to just 4 per cent today. This has been blamed for British firms selling to foreign rivals rather than choosing to grow independently.
Oliver Morley, Chief Executive of the PPF, said: “We are aware of the growing debate around the future of defined benefit schemes, including the role consolidation could play in improving member outcomes and supporting the UK economy.
“This report from the Tony Blair Institute, like the recent departmental review of the PPF, recognises our unique capabilities in this area. We welcome the chance to work with government and the wider industry to explore the various options and be part of the potential solution.
“We would also want to reassure our current members, and levy payers, that delivering the best outcomes for them remains our priority.”
