The Work and Pensions Committee (WPC) has written to Economic Secretary to the Treasury, Bim Afolami, requesting further details about the government’s plans for a permanent regulatory framework for defined benefit (DB) pension superfunds.

Afolami appeared in front of the WPC earlier this month as part of the committee’s DB pension inquiry, stating that the government was keen to introduce a permanent superfund regime “as soon as possible”.

In the session, Afolami said that the interim framework for superfunds was “not perfect” and the government would move the regime onto a permanent footing when parliamentary time allows.

The WPC has subsequently written to Afolami asking whether primarily legislation would be needed for a permanent regulatory framework for pension superfunds.

Afolami had also said that the ‘gateway test’ had put a clear delineation between the insurer space and a superfund space, and that the Treasury was now happy with the broad framework.

The importance of a ‘robust’ gateway test was also highlighted by Prudential Regulation Authority managing director, Sam Woods, as one way to mitigate the risk of regulatory arbitrage.

WPC chair, Stephen Timms, also referred to the Department for Work and Pensions’ response to the 2018 consultation, which suggested a more flexible approach to the gateway, as well as guidance issued by The Pensions Regulator in August 2023, which allowed more flexibility in the timing for gateway tests.

The WPC therefore asked Afolami what changes to the gateway test had addressed the Treasury’s concerns about the pension superfund regime.

“We recognise the time and effort required to prepare for these sessions and the number of people involved in doing so,” Timms said in the letter.

“We were very interested to hear your views on how policy might develop to enable DB schemes to invest in ways that might deliver greater benefits to sponsoring employers, scheme members and the UK economy.

“These are complex issues, which we will consider further in drafting our report.”

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