Stephen Timms writes to Bim Afolami Superfunds.

1. 15 January 2024
Bim Afolami
Economic Secretary to the Treasury
(By e-mail only)
Dear Bim,
Defined Benefit Pension Schemes
Thank you very much to you and Laura for giving evidence to the Committee on 10 January for
our inquiry into Defined Benefit (DB) Pension Schemes. We recognise the time and effort
required to prepare for these sessions and the number of people involved in doing so. 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.
In the meantime, it would be very helpful to have more detail on the issues below:
• Whether primary legislation is needed for a permanent regulatory framework for
pension superfunds (Q335);
• What changes to the gateway test addressed your concerns about the pension
superfund regime.
You said 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.”
(Q334-6). The importance of a “robust gateway” test was also highlighted by Sam
Woods of the Prudential Regulation Authority, in his letter to the Committee of 29
September 2023, as one way to mitigate the risk of regulatory arbitrage. The other was
to require superfunds to adopt a “bridge to (insurer) buyout” model, which DWP has
decided against.
DWP’s response to the 2018 consultation suggests a more flexible approach to the
gateway rather than a more robust approach, so as “not to be prohibitive to potential
entrants” (para 164). This is reflected in revised guidance issued by The Pensions
Regulator (TPR) in August 2023, which allows more flexibility in the timing for gateway
tests and access to superfunds for schemes that “cannot access buy-out now”, rather
than just to those that cannot afford it (as was the case under the 2020 guidance).

2. House of Commons
Palace of Westminster
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workpencom@parliament.uk
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Once again, thank you for the time at last week’s evidence session and for your engagement
with the Committee.
I would be grateful for your response to these questions by Monday 29 January. As is usual
practice with the Committee’s correspondence, I will be publishing this letter and your
response on the Committee’s website.
Yours sincerely,
Rt Hon Sir Stephen Timms MP
Chair, Work and Pensions Committee