Chancellor Rachel Reeves is expected to announce this week plans to allow corporate defined benefit (DB) schemes to invest an estimated £60billion to £100bn surplus funds in the UK economy.

DB schemes are also known as final salary schemes; they are often referred to as gold-plated pensions because they guarantee a set income in retirement regardless of how much the pension saver has managed to put away during their working life.

These schemes, which are often not available to younger workers, have tended to invest in less risky investments such as government gilts and A-rated corporate bonds.

Ms Reeves' predecessor, Jeremy Hunt, unveiled plans in July 2023 to encourage these types of pension funds to invest in more fledgling UK companies and start-ups in his Mansion House pension proposals.

The Financial Times and Sky News have both reported that Ms Reeves will use her growth speech on Wednesday to push forward these plans and include them in a pension schemes bill in the next few months.

Pension experts, including the trustees and consultants who help advise and manage final salary schemes, wanted reassurance that any plans that would force them to invest in more 'risky' assets would not compromise the fiduciary duty they have to employees and pensioners who were in the shcemes.

Ian Mills, partner and head of DB endgame strategy at pensions consultancy Barnett Waddingham, said it was great to hear that the Chancellor is expected to announce reforms to how companies can access their DB pension surpluses.

But he warned that allowing pension schemes to invest more of their surpluses might have unintended consequences.

He pointed out that many final salary schemes were being bought by insurance companies.

He said: "Whilst these reforms would undoubtedly be positive overall, the Government needs to avoid going too far. It won’t have escaped Rachel Reeves’ attention that the DB pension market remains a key buyer of gilts, whereas buy-out insurers tend to hold much lower allocations.

"Encouraging schemes to run-on for a while could be supportive of the gilt market. But reforms that go too far could encourage DB schemes to dump these gilts onto the market, forcing up the Government’s borrowing cost going forwards. This could, however, be offset to some degree by an acceleration of tax revenue – surplus withdrawals attract a 25% immediate tax charge."