The Government confirmed today it will change the law to allow companies to extract “surplus” money from private sector “defined benefit” final salary pension schemes to unlock new investment in the economy.
But a new coalition, the Pension Security Alliance, says the plans are dangerously short-sighted and must be reconsidered.
The group – made up of businesses, campaigners and pension experts – argues that the reforms could ultimately undermine the security of more than 8.8million scheme members, and more than a million beneficiaries.
They are demanding full consultation with those affected, warning: “Ministers and trustees must not ignore millions of people who have earned their pension and don’t want it put at risk.”
The Alliance points to the Government’s own Department for Work and Pensions consultation from 2024, which admitted: “Any extraction of surplus will reduce security for members.”
Their concern is simple. Allowing money to be removed from pension schemes before members’ benefits have been secured runs the risk of those schemes running short of money.
In that case, some schemes could collapse and be bailed out by the Pension Protection Fund, which sometimes pays reduced pensions to members.
Launching the campaign, the Alliance said: “Pension schemes exist to pay the pensions of workers who have earned their retirement income. They’re not piggybanks for others to dip into. It’s not right for ministers to put those pensions at risk like this.”
Campaigners are urging ministers to think again and prioritise the long-term security of pensioners, not short-term gains for businesses.
Dennis Reed of Silver Voices, a member of the Alliance, said he was “very worried” about the plan, which Reeves claims will encourage investment and growth. “This is risking the future pensions of employees and retired workers at a time when security in retirement is essential.”
He warned that past “contribution holidays” – when companies paused payments into schemes – led to collapses. “We don’t want this to happen again as a result of hasty withdrawals under any new Government proposals.”
Reed added: “If a company has cash flow problems, it will be tempting to raid the pension fund under the guise of investment – leaving the scheme underfunded and unstable if the business then collapses.”
Colette Isaaks, director of the Older People’s Advocacy Alliance, said the proposal “could be contrary to transparency, fairness, and the rights of pension policy holders.”
She urged Labour to listen: “The voices of older people must not be an afterthought in policymaking. They have supported these schemes throughout their working lives and depend on them in retirement.”
John Ralfe, independent pensions consultant and chair of two DB schemes, said security must remain the “absolute priority.” “Scheme assets must match liabilities to minimise the risk of a future deficit. Companies must also be legally required to repay any surplus if a shortfall later emerges.”
Crucially, he said, trustees must retain the final say on any extraction. If a surplus is removed, members should benefit too through increased pension payments.
Tracy Blackwell, chief executive of the Pension Insurance Corporation, said ministers need to be very careful. “This is about the financial wellbeing of generally older, and potentially vulnerable, people. Their voices have been absent from this debate.”
Polling by the Pension Insurance Corporation, the specialist insurer of defined benefit pension schemes, showed that 94% of its members don’t want politicians interfering with their pensions.
The Express has also raised concerns about Reeves’s proposals. Now, the experts agree: this plan puts ordinary savers in the firing line.
Here’s my view.
Rachel Reeves cannot simply raid pensions because it suits her growth agenda. Using people’s retirement funds to pump capital into the economy might sound clever on paper, but it smacks of short-term thinking and dangerous government overreach.
She’s betting on people’s consciences – asking them to sacrifice pension security for a vague promise of national growth.
This is not how pensions should be managed. They are there purely to secure the retirement of scheme members, not help politicians fund their growth plans.
This is no way to treat the 10 million people who spent their working lives paying in, only to be told their pot is now up for grabs.
This policy gets the priorities all wrong – and pensioners could pay the price.
