British Prime Minister Keir Starmer and Finance Minister Rachel Reeves are set to announce major reforms in the pension sector aimed at stimulating economic growth.

The announcement will take place on Tuesday during a meeting with top business leaders in London's financial district, including executives from Lloyds Banking Group, BT, Tesco, and BAE Systems.

The proposed reforms will focus on unlocking over one hundred billion pounds in corporate pension surpluses, enabling businesses to reinvest these funds.

Currently, approximately seventy-five percent of corporate defined-benefit pension schemes are in surplus, valued at one hundred sixty billion pounds.

However, existing regulations limit how these funds can be utilized, often restricting them to low-yield assets such as government bonds.

The new policy aims to provide businesses with greater flexibility, allowing pension surpluses to be reinvested back into companies or used to enhance employee benefits.

Starmer emphasized the need for 'rewiring the economy' through creative reform and the removal of barriers to growth.

This announcement comes ahead of a major economic policy speech by Reeves on Wednesday, in which she is expected to outline strategies to address the UK's economic stagnation.

The government has faced criticism from some employers who attribute slower economic momentum to increased tax burdens introduced in Reeves' first budget plan.

Downing Street highlighted that these reforms are intended to help businesses deploy surplus funds more effectively, though some concerns have been raised about market volatility affecting pension surpluses.

A report from the Pensions and Lifetime Savings Association last year broadly supported the concept of surplus sharing but cautioned about potential fluctuations in market conditions.

The reforms form part of the Labour government's broader agenda to position the UK as the fastest-growing economy among the Group of Seven nations, a pledge made during last year’s election campaign.