Labour’s grand plan to unlock £160bn now expected to net just £11bn

 Labour’s plan to boost economic growth by letting firms raid their own pension funds would unlock £149bn less than expected, official figures show.

The controversial move, announced earlier this year, promised to unleash up to £160bn to invest by loosening restrictions and helping firms release surplus cash from their defined benefit schemes.

However, the Department of Work and Pensions’ (DWP) own impact assessment of the policy has revised the figure down to just £11bn, according to a report from the Society of Pension Professionals (SPP).

Experts previously warned that surplus release was a threat to pensions and risked a repeat of Robert Maxwell’s infamous £400m theft of staff retirement funds at the Daily Mirror.

Rachel Vahey, of AJ Bell, said the Treasury’s predictions had been “wildly over-optimistic”, while Nick Hyett, of advisers Wealth Club, said any surplus released could just be handed to shareholders.

Around 8.8 million people have a defined benefit pension, which provides guaranteed retirement income for life that usually rises with inflation. There are around 5,000 schemes which are assessed every three years by an independent actuary to check they can afford their pension promises.

Historically, many have been in deficit and as recently as 2019, just 600 were adjudged to be in surplus. However, official government figures show that this had grown to more than 1,800 by 2024.

As part of its upcoming Pensions Bill, the Government announced it would loosen existing rules on firms accessing surpluses and unleash £160bn to boost investment and benefit scheme members.

Schemes can already distribute their surpluses, but strict rules, designed to protect pensions at all costs, make it rare. Options for using the cash include paying more to shareholders, increasing spending on their business or making investments elsewhere.

In a new report however, the SPP said: “Contrary to original suggestions of up to £160bn of pension scheme surpluses being released, the DWP impact assessment now suggests a much lower figure of £11bn.”