Pensions Insight: 30 May to 5 June 2023

In this insight we provide the latest update on the potential expansion of the PPF, the Government’s Long-term Investment for Technology and Science initiative and implementation of the McCloud remedy.

PPF responds to recent reports on its potential expansion to cover DB consolidation

In our last Insight, we reported on the potential expansion of the Pension Protection Fund (PPF) to cover challenged smaller defined benefit (DB) pension schemes. This followed press briefings from the Chancellor on the Government’s consideration of a wider role for the PPF and also a 29 May 2023 report from the Tony Blair Institute for Global Change which provided thoughts on the future of defined benefit pension provision including, an extended role for the PPF so that it would become the UK’s first ‘superfund: GB Savings One’, with the smallest 4,500 UK DB schemes being able to voluntarily transfer to the PPF and, at a later stage, this being rolled out to other DB pension schemes, defined contribution and public sector arrangements.

The idea stems from a 2022 DWP review of the PPF which recommended that the Department for Work and Pensions (DWP) and PPF look at how the PPF’s “skills and capabilities…could be used in other ways for public benefit; for example…acting as a consolidator…for schemes which would benefit…but which are not attractive to commercial consolidators.”

The PPF has now responded to the recent reports to confirm that it would ‘welcome’ the opportunity to collaborate on consolidation – any PPF input on this area would need legislative change so would require Government input to facilitate.

The potential expansion of the PPF appears to be firmly on the Government’s radar at the moment. However, we will have to wait and see whether it gains more traction in coming months, and if it does, precisely which DB schemes are within scope.

Update on the Government’s Long-term Investment for Technology and Science initiative

The Department for Business and Trade and HM Treasury have published responses and next steps in respect of their March 2023 consultation on the creation of investment vehicles in science and technology companies through a Long-term Investment for Technology and Science (LIFTS) initiative that was announced in the Spring Budget.

The LIFTS initiative aims to increase investment from institutional investors, specifically defined contribution pension funds. The idea is for British Patient Capital, a commercial subsidiary of the British Business Bank and the biggest domestic institutional investor in UK venture capital, to invest together with an institutional investor in UK science and technology companies.

The plan is for the Government to provide up to £250m through LIFTS and the Government asked for feedback in the consultation from interested parties as to how this funding could be best used and the proposal criteria. The Government, through the British Business Bank, will assess applicants’ proposals for its funding that must offer value for money and meet certain assessment criteria.

The Government has confirmed that it will go ahead with the call for proposals which can be found here. The response also notes that other Government departments are continuing their work on the ‘wider productive finance agenda’ designed to support the Government’s policy aim of ‘unlocking institutional investment’. The Chancellor will issue more statements on the agenda in the coming months.

McCloud remedy: LGPS consultation on supplementary issues and draft regulations

On 30 May 2023, the Department for Levelling Up, Housing and Communities published a consultation on supplementary issues and draft implementation regulations relating to implementation of the McCloud age discrimination remedy for the Local Government Pension Scheme – issues consulted upon include aggregation where a member has multiple memberships, flexible retirement, compensation for loss relating to the age discrimination and interest for late payments.

The draft regulations are intended to come into force on 1 October 2023. The consultation closes on 30 June 2023.