DB pension scheme surplus

Stay up-to-date with the latest conversations about the UK Government's growth agenda. On this page we explore the Government's plans to reform DB scheme surplus rules to unlock billions of pounds in investment to benefit employers, scheme members and the UK's economy.

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Pensions & benefits Endgame strategy and journey planning DB pensions DB surplus reform Economy
Making sense of the Chancellor's ambitious plans for DB schemes
26 February 2025

Join this webinar where Michelle Wright, David Fairs, Steve Webb and Steve Hodder will discuss how the Chancellor's recent proposals on DB pension scheme surpluses could impact your pension scheme and/or business.
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Pensions & benefits DB surplus reform DB pensions Mansion house reforms Policy & regulation
Government’s plans for extracting ‘surplus’ DB funds go much further than most have realised
03 February 2025

Figures from TPR released alongside the Treasury’s announcements on planned pension reform highlight the enormous sums that can potentially be distributed into the economy from DB schemes.
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Pensions Bulletin 2025/04
30 January 2025

This edition: Government to enable surplus extraction from DB schemes, Collecting inheritance tax from unused pension funds and death benefits – consultation closes, Government amendments to the Finance Bill published, and more.
Read the Bulletin

New rules promised on DB pension scheme surplus distributions

After a number of years of industry engagement, Government has announced that it will be changing the rules on DB pension scheme surplus use. The key policy purpose is to unlock “trapped” surplus assets for investment in the wider economy and to fuel economic growth. The press release also notably references the option of sharing of surpluses with scheme members.

Alongside the Treasury’s announcement, TPR has published detailed analysis of the latest funding position of the UK’s 4,800 pension schemes, which indicates:

50% of schemes are now in a buy-out surplus, with collective surpluses of c£100bn

75% of schemes are now in surplus on a “low dependency” basis, with collective surpluses of c£160bn (technically, this has been assessed on a “Gilts+0.5%” basis)

We think it is noteworthy that Government announcement focusses on the £160bn figure, perhaps indicating that new policy could allow surpluses to be released above “low dependency” full funding (rather than the higher hurdle of buyout funding).

Of course, any release of scheme assets needs to be treated very carefully with the right safeguards in place to ensure security of member benefits is not put at undue risk. TPR has noted its support of the proposals, stating that “where schemes are fully funded and there are protections in place for members, we support efforts to help trustees and employers consider how to safely release surplus if it can improve member benefits or unlock investment in the wider economy”.

Government has promised more detail via a response to the DWP’s 2024 consultation on DB Options in the Spring. Assuming the Government wishes to ensure any law changes are part of the 2025 Pension Schemes Bill, we would expect the timing for more detail to be around April 2025.