Chancellor, Jeremy Hunt, has confirmed that the government will be pushing ahead with plans to explore how the Pension Protection Fund (PPF) could act as a defined benefit (DB) consolidator, despite concerns from some industry stakeholders.

Documents published following the Chancellor's statement revealed that the government will be looking to consult "this winter" on how the PPF can act as a consolidator for DB schemes unattractive to commercial providers, with a view to establish a public sector consolidator by 2026.

During his speech, Hunt also confirmed that the government would be looking to "open the PPF as an investment vehicle for smaller DB schemes".

The Department for Work and Pensions (DWP) previously held a call for evidence around how DB pension schemes could increase the amount invested in productive asset classes, including the potential role that the PPF could play within this.

The department identified the PPF as an “obvious candidate” to run a potential DB scheme public consolidator, while the PPF itself has also said that it would be well placed to run the public sector consolidator.

The latest update has also been welcomed by the lifeboat, as a PPF spokesperson said: “We welcome the government’s commitment to establishing a public sector consolidator by 2026. We believe a public sector consolidator can help deliver the government’s objectives and complement existing commercial solutions.

"As the government has recognised, we would be well placed to take on this additional and separate role. We look forward to working closely with DWP and industry as the detailed design of, and eligibility for, the new vehicle is developed.”

However, some in the industry raised concerns that a public consolidator could limit the success of private sector solutions, with a number of competition concerns identified in response to the government’s recent call for evidence.

The government's reponse acknowledged these concerns, revealing that respondents expressed caution to each of the options under consultation, "frequently expressing concerns regarding the potential for changes in the funding positions of DB schemes, the need for clear regulatory safeguards around surplus extraction, and the need to establish a clear market failure in existing DB endgame solutions before introducing a public consolidator".

Given this, the DWP confirmed that it will also launch a public consultation to consider the detail of measures to make surplus extraction easier, including design, eligibility, safeguards, and the viability of a 100 per cent PPF underpin.

In addition to this, the Chancellor said the government would be looking to encourage the current trend of DC pension fund consolidation, suggesting that, by 2030, the vast majority of savers will belong to schemes of £30bn or larger.

In line with this, the government confirmed that it will push ahead with a March 2025 deadline for the accelerated consolidation of Local Government Pension Scheme (England and Wales) assets, setting a direction towards fewer pools exceeding £50bn assets under management, and implementing a 10 per cent allocation ambition for investments in private equity.

The government will also be looking to publish a review of the master trusts market, five years after the 2018 Master Trusts regulations came into force.

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