Economic Secretary to the Treasury, Bim Afolami, has reassured the Work and Pensions Committee (WPC) that the government is keen to introduce a permanent superfund regime “as soon as possible”.

Appearing in front of the WPC as part of its ongoing defined benefit (DB) pension inquiry, Afolami was asked why the 2023 King’s Speech omitted any mention of a permanent regime for superfunds, despite the Chancellor committing to this just a few months prior in his Mansion House speech.

“Without echoing the point about government time scales and parliamentary time scales, we are very keen to get this on a permanent legislative footing as soon as possible,” Afolami responded, pointing out that there is already an interim regime on superfunds”.

“That's not perfect, but it is something and when parliamentary time allows we are very keen to move the regime onto a permanent footing,” he continued. “I agree that what we are very keen to do is to get this on a permanent legislative footing.”

Pressed on the issue further, Afolami said that the interim regime has been working reasonably well, and that superfunds are expected to be a "very useful addition" to the broader market that doesn't undermine insurers.

"We have already had Clara—I think that is the name of the superfund that has already been through the regulatory process so far, and there are others that are interested in doing so," he continued.

"Hopefully, as soon as parliamentary time allows, we will get that on to a permanent footing. That will then hopefully lead more people to come through that."

Adding to this, HM Treasury Director of the Personal Taxes, Welfare and Pensions, Laura Webster, suggested that much of the background work required for a superfund regime has been underway, with "a lot of debate and issues to work through from [the initial consultation in] 2018 to Mansion House".

However, Timms pushed back on this, noting that the 2018 consultation was “by far the longest outstanding consultation to which the government hadn't responded; it took five years".

Timms also said that there is “a bit of suspicion” that the Treasury doesn’t really want to introduce a superfund regime, partly due to concerns about the insurance industry, and “partly because of the worry that it would have the effect of depressing demand for the gilts, which, obviously, in the short term is very important for the for the Treasury”.

However, while Afolami admitted that he was “similarly surprised” when he saw the expected timelines for the permanent regime, he reassured Timms that it isn’t the case that the Treasury doesn’t want to do this.

He continued: “There was a debate, far in the past now, about exactly where superfunds sit vis-à-vis insurers. That has been clarified by the gateway test, which makes it clear that you're only in a sort of superfund world when it is clear that scheme is not in a position where it could reach a full buyout.

“That gateway test having been established has put clear delineation between the insurer space and a superfund space.

"With that having been clarified, I think that all in HM Treasury, Department for Work and Pensions (DWP) and across government are now happy with the broad framework.

"It's now just a case of moving what is interim into permanent and we're going do that as soon as we can, I promise."

However, Afolami was unable to confirm whether the draft legislation is ready to go when parliamentary allows, when pressed by Timms.

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