TPT supports the Government’s objective of unlocking surplus in well-funded DB schemes while maintaining member protections. It believes the framework strikes a sensible balance between enabling surplus extraction and maintaining appropriate protections for members.
However, as a DB master trust, TPT thinks it is important that DWP and The Pensions Regulator (TPR) should provide additional guidance in a number of areas to ensure the regime can be implemented consistently and effectively across different scheme structures, including multi-employer schemes (MES). TPT also looks forward to engaging on the equivalent surplus release regulations for superfunds in due course, which it expects will largely reflect this regime.
TPT’s response focuses on a small number of areas where further clarity would improve the operation of the regime:
Low dependency funding test: TPT argues that the regulations should make clear whether the test is based on a scheme’s existing low dependency funding basis or whether an updated basis can be used. Greater certainty is also needed over who determines the basis and how it should be applied.
Sectionalised and multi-employer schemes: TPT strongly supports the inclusion of provisions allowing surplus to be assessed and released at section level, which TPT views as particularly important for DB master trusts and sectionalised arrangements. However, the regulations should more clearly distinguish between sectionalised and multi-employer schemes, clarify how employer consent operates at section level, and provide guidance on the allocation of surplus between participating employers. In many circumstances, TPT believes that an employer in a multi-employer scheme wishing to release surplus may find it more straightforward to move into a standalone arrangement.
Member surplus payments and revaluation: TPT welcomes the inclusion of provisions covering deferred member surplus payments, but believes the regulations should provide greater clarity on how revaluation should operate, including when revaluation ceases and the implications for members with protected pension ages. Clear rules would help ensure consistent administration, actuarial treatment and member communications.
TPT also suggested that the Government could consider allowing schemes to release surplus to pay contributions into a scheme held in a separate trust. Schemes are already able to use surplus to pay DC contributions within the same trust, so TPT believes allowing surplus to be diverted elsewhere could be beneficial in some circumstances. This could include where an employer has open accrual in a CDC scheme that is separate from its closed DB scheme.
Ruari Grant, Head of Policy at TPT, said: “We support the Government’s objective of unlocking surplus in well-funded DB schemes while maintaining appropriate protections for members. The proposed regime will provide a workable framework, but greater clarity in a number of areas will be important if it is to operate consistently across the full range of scheme structures.
“In particular, the regulations need to reflect the practical complexities of DB master trusts, sectionalised arrangements and multi-employer schemes. As innovative schemes and solutions continue to change the market, regulations must keep pace to ensure there is adequate flexibility for these schemes to fairly and sustainably support their members.”
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