Head of DB Scheme Actuary, Hymans Robertson, said: “The Pension Schemes Act created the legal foundation for greater surplus flexibility - but left much of the real substance to secondary legislation. With today’s consultation on the draft regulations, we’re finally seeing that detail start to crystallise. Full funding on a low-dependency basis as the threshold for surplus extraction is no surprise; it’s been well signposted. But the draft regulations now set out the framework trustees must follow before any surplus can be released, including actuarial certification and the required notifications to members and TPR. We support the core aim: strong member protection balanced with appropriate flexibility. But ongoing surplus sharing must be operationally workable. If trustees and sponsors see only governance drag, they won’t view it as a viable long-term option. That’s why the practicalities matter. The proposed three-year forward-looking test needs to be proportionate. And because trustees must notify members at least three months before any payment, the full process effectively stretches to around six months. That’s a long cycle – and it makes the current framework feel less suited to more regular or frequent surplus distributions. Ultimately, getting the detail right is essential to give schemes, trustees and employers the confidence to engage – while safeguarding better outcomes for members. And with another piece of the puzzle now on the table, alongside TPR’s accompanying statement, it’s clear we’ll see more of the picture come into focus over the months ahead.”
Jon Forsyth, Chair of the Society of Pension Professionals (SPP) DB Committee said: “The draft regulations appear to set out a largely sensible framework to make this policy work, but the devil will be in the detail and there is more to come with The Pension Regulator’s guidance. As the SPP has often said, with many DB schemes now in surplus, enabling trustees to safely share surplus funding with employers and members could bring better outcomes for both, while also potentially supporting investment and economic growth. In practice, trustees are likely to want to consider safeguards beyond what is in the law, as well as how much of any surplus should be used for the benefit of members. Looking ahead, it will be interesting to see how this area develops and influences DB strategy - including how trustees, sponsors and indeed members react to this policy in practice.”
Helen Forrest Hall, Chief Strategy Officer at the PMI, said: “PMI welcomes the publication of the draft surplus regulations for consultation. The proposals give trustees a clear and central role in determining when surplus can be used, with decisions grounded in low-dependency principles consistent with the DB Funding Code. The move to a forward-looking test, rather than a single point-in-time assessment, provides a more practical basis for planning. The continued requirement for member notification maintains transparency, and the work alongside the FRC on supporting standards will help ensure consistency across the framework. This additional clarity will support schemes and employers as they consider their long-term funding and surplus strategies. It is a constructive step that enables schemes to begin preparing for implementation with greater confidence.”
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