The Pension Protection Fund (PPF) has said that it would be well placed to run the public sector consolidator proposed in the Department for Work and Pensions’ (DWP) call for evidence on options for defined benefit (DB) schemes.

The call for evidence was launched following Chancellor, Jeremy Hunt’s, Mansion House reforms in July and sought feedback on how DB schemes and the PPF could support increased productive investment in the UK.

One of the proposals in the call for evidence was for a was a public consolidator for DB schemes, and PPF CEO, Oliver Morley, stated this option could “substantially deliver against the government's objectives, complementing existing commercial solutions, and we’d be well placed to run such a fund”.

“To achieve the government’s goals at scale, including driving a material change in DB allocations to productive investment, consolidation must be an integral part of the solution,” he added.

In its response, the PPF set out its ideas on how a public sector consolidator could be designed, structured and set up.

It also outlined how its own investment approach and asset allocation could act as a blueprint for what the consolidator could achieve.

The PPF currently has more than £32bn in assets under management, of which around 35 per cent is allocated to gilts and approximately 30 per cent is allocated to productive assets.

“Running a public sector consolidator would be a natural evolution of the PPF’s existing capabilities,” Morley stated.

“Through our investment approach, the PPF already provides a blueprint for how the government’s objectives can be delivered at scale.

“We’re a major buyer of UK gilts, invest heavily in productive assets and, by investing for growth over the long term, we’ve delivered greater security for our members.”

However, some in the industry are not as keen on the idea of a public consolidator, with the Pensions and Lifetime Savings Association (PLSA) noting that its members did not currently support the creation of such a consolidator.

The DWP’s call for evidence also sought input on how DB schemes can increase their allocations to productive finance assets.

In its response, the PPF argued that the current framework did not support this objective and fundamental changes to the objectives for DB investments were needed, stating that adjustments to incentive would not secure a substantial increase in DB allocations to public finance.

However, it said that consolidation can achieve the government’s objectives at scale without mandation by removing the employer covenant link with schemes.

“If DB schemes are to increase their appetite for productive investment – which requires investing over a 10-to-15-year period and accepting more risk and volatility – investment objectives will need to be changed,” the PPF stated.

“Options which seek to realign incentives within the current framework – such as enabling easier access to scheme surpluses – are unlikely to meet the government’s productive finance objectives.”

The PPF added that it plans to engage further with the government and industry on the call for evidence over the coming months.

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