A £1.5tn superfund should be created from thousands of existing retirement schemes in a bid to alleviate Britain's mounting pensions crisis, a City taskforce will say this week.
Sky News has learnt that a committee established by the Pensions and Lifetime Savings Association (PLSA) will recommend the move as a way of addressing the existing deficit in the UK's defined benefit pension system, which stands at more than £400bn.
The taskforce is expected to say that consolidating defined benefit schemes - with the twin aims of improving efficiency and investment returns - is the most effective means of defusing the country's pensions timebomb.
Chaired by Ashok Gupta, who led a Bank of England inquiry into pension fund investments, it is expected to conclude that members of weaker defined benefit retirement schemes have only a 50:50 chance of receiving their full benefits.
There are more than 6000 defined benefit schemes across the public and private sectors in the UK, with a collective responsibility for paying pensions to 16 million members.
In total, these schemes hold close to £1.5tn in assets.
A Whitehall source briefed on the report's contents said the PLSA taskforce would outline four options for potential reform: combining administrative functions across schemes, generating £600m of annual savings; or pooling schemes' assets but not back office operations, which could save £250m each year.
Combining both assets and administrative functions, as well as schemes' governance responsibilities, could save a total of £1.2bn annually.
However, the report is expected to set out a clear preference for a full merger into one or more superfunds, which would relieve employers and trustees from their duty to make future benefit payments.
The Whitehall source with knowledge of the taskforce's conclusions said it believed that the risk of the weakest schemes failing would be slashed from almost two-thirds to just 10%.
"They want to look at whether trustees should be able to sanction cuts to pension benefits in return for access to a superfund," the insider said.
"It's sensible work for the industry to do and it's long overdue."
The PLSA report will come just weeks after a Government green paper on pensions reform was criticised for failing to embrace radical options for alleviating the UK's pension crisis.
Due to be published on Thursday, it will also emerge just days after Sir Philip Green, the high street billionaire, agreed a deal to pump more than £340m into a new pension scheme targeted at former BHS employees.
The Pension Protection Fund, an industry-funded lifeboat, The Pensions Regulator and BHS's pension trustees all endorsed the settlement.