The SPP supports the use of a low dependency funding basis as the minimum funding test and believes decisions on the level of surplus released should remain with trustees, taking account of scheme-specific circumstances and covenant strength. However, the SPP is calling for changes to make the regime more practical, particularly for schemes intending to remain on a long-term run-on basis. It believes the proposed process is geared towards one-off payments and could make regular or phased distributions unnecessarily burdensome.
The SPP is also seeking greater flexibility around the payment process, including allowing trustees to release less than the provisional amount without restarting the process, and extending the proposed five-working-day period between actuarial certification and payment.
The SPP believes the proposed three-year forward-looking actuarial test should also be refined to reduce uncertainty and avoid disproportionate costs. It is recommending wording more closely aligned with existing actuarial certification requirements.
The SPP also highlights the need to align pensions and tax legislation for segregated schemes, where current uncertainty could delay legitimate surplus returns.
Jon Forsyth, Chair of the SPP’s DB Committee, said: “The SPP welcomes the Government’s proposals, which at a high level provide a sound framework for well-funded DB schemes to make productive use of surplus while protecting members. However, the regime needs to work effectively in practice. Greater flexibility around regular and phased payments, the actuarial tests and payment timetable would help ensure the new framework delivers its intended benefits without creating unnecessary governance burdens or other unintended consequences.”
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