Bank of England sceptical about pension superfunds

Plans for “pension superfunds”, cleared by industry regulators in recent weeks, could pose a threat to financial stability.

Plans for “pension superfunds”, cleared by industry regulators in recent weeks, could pose a threat to financial stability, according to Andrew Bailey, governor of the Bank of England.

Pensions specialists have spent more than two years working on the concept of pension superfunds, through which a number of large defined-benefit pension schemes could be consolidated into one scheme. 

They argue that where employers are looking to offload their defined benefit pension liabilities – a popular option with firms keen to manage risk and costs – superfunds could offer a better alternative for members and scheme sponsors than working with an insurer, which is currently the only option.

Pension superfunds were effectively given the go-ahead last month by the Pensions Regulator, which published new rules governing how such arrangements could work, including protections for members. 

But while the regulation won the backing of pensions minister Guy Opperman, the Bank of England is understood to have significant concerns. Bailey reportedly believes that the regulation proposed is not robust enough to protect the scheme’s members – and that if a large pension superfund sector develops, this could become a systemic risk.

Recommended

Early repayment charges: should you abandon your fixed-rate mortgage for a new deal now?
Mortgages

Early repayment charges: should you abandon your fixed-rate mortgage for a new deal now?

Increasing numbers of homeowners are paying an early repayment charge to leave their fixed-rate mortgage deal early, and lock in a new deal now. Shoul…
30 Sep 2022
Energy meter reading day: why you need submit your gas and electricity readings now
Personal finance

Energy meter reading day: why you need submit your gas and electricity readings now

Energy meter reading day - you need to submit your gas and electricity readings as soon as possible ahead of the October energy price increase
30 Sep 2022
Should you take a 25% tax-free pension lump sum in instalments?
Pensions

Should you take a 25% tax-free pension lump sum in instalments?

Taking out a 25% tax-free lump sum sounds appealing but it might not be the best way to manage your pension
30 Sep 2022
Should you fix your mortgage? Here are the best rates available now
Mortgages

Should you fix your mortgage? Here are the best rates available now

Rising interest rates look set to spring a nasty surprise on millions of homeowners next year. You need to take steps today to protect yourself from a…
30 Sep 2022

Most Popular

Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
How the end of cheap money could spark a house price crash
House prices

How the end of cheap money could spark a house price crash

Rock bottom interest rates drove property prices to unaffordable levels. But with rates set to climb and cheap money off the table, we could see house…
28 Sep 2022
What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022