The government has announced a proposal to release billions of defined benefit pension scheme surpluses into the UK economy.
A defined benefit pension is often called a final salary or career average scheme. It is a workplace retirement plan that guarantees a specific, predictable income.
Launched by the Minister for Pensions today, the consultation sets out plans to give trustees the flexibility to release some surplus funds to benefit employers, scheme members and the wider economy.
The number of schemes in surplus has quadrupled over the last five years, meaning that, for most schemes, assets now exceed the value of promised pension benefits.
Following the passing of the Pension Schemes Act, this consultation marks the next stage in a programme of reform that will boost investment and benefit pension savers.
Minister for Pensions Torsten Bell said: “The steady world of defined benefit pensions has seen a huge change take place. For the first time in a generation, defined benefit pension schemes are in a genuinely strong financial position – with the vast majority of schemes now having a surplus. This is something well worth celebrating.
“Now is the time to give trustees the option of safely translating some of those surpluses into real benefits for members and employers.”
The plans will strengthen regulatory oversight, with trustees required to notify The Pensions Regulator (TPR) of surplus release detailing information such as a scheme’s assets, liabilities and surplus payments to employers and members. TPR and the Financial Reporting Council will also be providing further guidance and support to the regulations.
The consultation will run for 12-weeks with the new regime expected to be in place from April 2027.
Richard Knox, TPR’s Executive Director, Strategy, Policy and Analysis, said: “Many well run, well governed and well-funded defined benefit schemes are also considering how to safely release surplus to enhance member benefits and strengthen sponsoring employers. To help, today, we have set out the principles schemes should follow when making decisions on surplus which we will continue to evolve as the new regulatory framework emerges.”
