The government has launched a consultation on new rules designed to make it easier for well-funded DB schemes to release surplus funds to sponsoring employers and members.
The Department for Work and Pensions consultation, published today, sets out draft regulations under the Pension Schemes Act 2026, which would allow trustees to make surplus payments where strict funding safeguards are met.
Announcing the consultation the government said around four in five DB schemes are now in surplus, with aggregate surplus estimated at £160bn. It said the proposed framework would “unlock value” for both employers and scheme members while ensuring retirement benefits remain protected for the longer term.
Under the proposals, trustees would remain the key decision-makers and would need to ensure schemes are funded at least to their low-dependency funding level before surplus could be released. The draft regulations also introduce a forward-looking test, requiring actuarial certification that the scheme is expected to remain above this threshold for three years after any payment.
Trustees would also need to notify members at least three months before a proposed surplus payment, with The Pensions Regulator informed after payment is made.
The regulations are expected to come into force in April 2027, subject to consultation responses and parliamentary approval. The consultation closes on 2 September 2026 with the government seeking views from trustees, employers, advisers, actuaries and other industry stakeholders on the detailed framework for implementing this new regime.
Among the key areas on which feedback is being sought are whether the proposed low-dependency funding threshold provides an appropriate level of protection for members, the operation of the new actuarial certification requirements, and the proposed three-year forward-looking funding test.
The consultation also asks for views on trustee decision-making, member notification requirements, the role of The Pensions Regulator and how the new rules should operate in practice for different types of schemes.
The government is also seeking industry views on the proposed statutory override that would allow trustees to amend scheme rules to permit surplus payments, where no such power currently exists, as well as the broader safeguards needed to ensure member benefits remain protected while enabling well-funded schemes to release excess assets.
The Pensions Management Institute chief strategy officer Helen Forrest Hall welcomed the publication of these draft 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.”
She adds: “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.”
WTW head of trustee consulting Adam Boyes says: “The Government was right to stick to its guns and allow surplus payments where schemes are fully funded on a low dependency basis and expected to remain so. The new funding regime does not require further contributions once funding reaches this level, so allowing refunds from schemes with a surplus on this basis is symmetrical.
“Rather than setting a higher hurdle in regulations, the Government and The Pensions Regulator are leaving trustees to consider the size of any buffer above low dependency that may be appropriate. Most schemes would have assets available for distribution even if they only released surplus on a buyout basis.
“WTW’s 2026 endgame survey found that half of £1bn+ schemes now anticipate that they will run on rather than buy out quickly; this allows surpluses to be utilised to the benefit of employers and members.”
