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

Look beyond the default options if you want to start taking income from your pension
Pensions

Look beyond the default options if you want to start taking income from your pension

Regulators have come up with four ready-made plans for people who want to start taking an income from their pension fund – but you should still seek h…
26 Jan 2021
Suspending your pension contributions? Remember the magic of compounding
Pensions

Suspending your pension contributions? Remember the magic of compounding

Think very carefully before suspending your pension contributions, or you will miss out on compound interest – the “eighth wonder of the world”.
12 Jan 2021
Shop around to secure the best Sipp
Self invested personal pensions

Shop around to secure the best Sipp

If you’re one of the growing number of savers with a self-invested personal pension (Sipp), make it a new year’s resolution to check you’re getting va…
11 Jan 2021
Scammers target pension transfers
Pensions

Scammers target pension transfers

People who apply to transfer their defined-benefit pension to another pension provider need to be on their guard against a proliferation of scammers.
18 Dec 2020

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021