UK to release pension surpluses to fuel growth push, Sky News reports

LONDON (Reuters) - British finance minister Rachel Reeves will later this week announce plans to allow corporate pension scheme surpluses worth tens of billions of pounds to be released and reinvested, Sky News reported on Sunday.

Reeves is seeking new sources of investment as she tries to breathe life into a stagnant British economy to fund Prime Minister Keir Starmer's plans to raise living standards and rebuild the country's creaking infrastructure.

Citing unnamed government sources, Sky said Reeves would use a speech on Wednesday to announce plans to allow the release of surpluses estimated to be worth around 60 billion pounds ($74.87 billion) held in pension schemes that provide fixed payouts for their members.

The Treasury declined to comment on the report and did not confirm that the speech would take place on Wednesday. Reeves has previously said she would give a speech this week without providing further details.

The report said legislative changes needed to implement the plans could be introduced in the coming months as part of a wider pensions reform outlined by Reeves last year.

Another report by industry body Pensions and Lifetime Saving Association (PLSA) published in April 2024 broadly supported more surplus sharing, but said surpluses could change based on market fluctuations.

Scheme trustees may be reluctant to take risks, and there was no certainty how or where any released funds would be invested, the PLSA report said.

The previous Conservative government also sought to tap corporate pension scheme surpluses and in 2024 reduced the tax charge when surpluses are repaid to employers to 25% from 35%.

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Reeves' speech will be closely watched after a rise in global borrowing costs earlier this month demonstrated how tight Britain's public finances are; constrained by a reluctance to raise taxes and self-imposed rules limiting borrowing, Reeves faces having to cut spending further to balance the books.

Having upset businesses with tax hikes and struggled to show signs of economic improvement in the first six months since a landslide election win, Starmer and Reeves have in recent weeks slashed planning rules and promised a major push into AI in search of the growth needed to avoid further spending cuts.

"I'm determined that we're going to go further and faster in delivering that growth so that we can improve the living standards of ordinary working people in our country," Reeves told Sky News in an interview on Sunday.

Reeves also said she was "happy to look at" an idea, put forward last week by European Trade Commissioner Maros Sefcovic, that Britain could join a pan-European customs scheme. The scheme is not the same as the European Union's full Customs Union, which Labour has said it will not rejoin.

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(Reporting by William James; editing by Clelia Oziel)