Despite defined benefit (DB) pension schemes' resilience and overall good health, scheme trustees may still be reluctant to release any surplus, Insight Investment head of solution design, Jos Vermeulen, has said.

The Pensions Schemes Bill, which is expected to be shared before the summer recess, is expected to include measures to unlock surplus funds in UK private-sector DB pension schemes, subject to agreement from scheme trustees.

Insight Investment suggested that this could help unlock the full potential of the £1.2trn in these schemes, which includes £160bn of surpluses.

"Pension scheme members could receive boosts to their retirement income, companies gain access to new capital, and the government generates meaningful tax revenues. All of these would provide a much-needed boost for the UK economy," Vermeulen explained.

He also pointed out that the government may receive 25 per cent of surplus released in tax revenue, potentially as much as £40bn, providing an immediate injection of capital that could fund the government's New Hospital Programme or the planned increase in defence spending this parliament.

"The full cost of the winter fuel allowance would be covered many times over," he added, arguing that this "dwarfs" the near-term impact of the recently announced Mansion House Accord, which is projected to release £25bn into the UK economy, drawn out over five years.

However, Vermeulen warned that despite pension schemes’ resilience and overall good health, trustees may still be reluctant to release any surplus.

Given this, he encouraged the government to consider increasing the protection provided by the PPF to 100% of all pension scheme benefits, suggesting that this would be the most "straightforward way" to reassure trustees and members.

"This would likely increase the amount of surplus released and the associated benefits," he said.

"The costs and risks of doing so would be minimal and insignificant when set against the potential positive impact of such action. We are pleased that the role of the PPF is an ongoing focus of the government."

Despite broad backing for the plans to unlock DB surpluses, industry experts previously argued that a greater safety net for DB schemes is needed in order to give scheme trustees the confidence to use surplus funds, with broader industry research suggesting that the plans are also a concern for many DB savers themselves.

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