1. TPR welcomes proposals to boost scale and value in the pensions system
The Pensions Regulator (TPR) has welcomed new Government proposals aimed at strengthening the UK’s pensions landscape by encouraging greater scale and unlocking value within defined benefit (DB) schemes.
Announced as part of the Department for Work and Pensions’ (DWP) response to its consultation on DB options, the measures include plans to support scheme consolidation and remove regulatory barriers that currently restrict how surpluses can be used. One of the central proposals is the potential creation of a Government-backed consolidator to help DB schemes secure liabilities more effectively.
Minister for Pensions Torsten Bell highlighted the need for mature DB schemes to have clearer routes to either run on or secure benefits, without compromising member protection. The Government also signalled plans to allow well-funded schemes to share surplus funds with employers or members, subject to trustee agreement and suitable safeguards.
TPR Chief Executive Nausicaa Delfas said, “We have long supported the move to fewer, larger well-run schemes with the scale and expertise to invest in diverse assets in savers’ interests, and as such we welcome these announcements to boost scale and value in the pensions system.”
2. Significant reforms announced on defined benefit pension scheme surplus extraction
The Government’s package of pension reforms could make it significantly easier for trustees of defined benefit (DB) pension schemes to return surplus funds to sponsoring employers or scheme members.
Outlined in its consultation response ‘Options for DB Schemes,’ the proposals include a new statutory override allowing trustees to amend scheme rules to enable surplus payments. Restrictions under Section 251 of the Pensions Act 2004 will be lifted, and the funding threshold for surplus extraction will be lowered to a low dependency basis, subject to further consultation.
Trustees will no longer need to prove a surplus payment is in members’ interests but must continue to act within their fiduciary duties. While the 25% tax charge on authorised surplus payments will remain for now, the Government is reviewing the broader tax treatment and will work with The Pensions Regulator on new guidance.
Employers with DB schemes in surplus are likely to welcome the changes, though practical impact will depend on trustee decisions and scheme specifics.
The Government also confirmed it will not proceed with a proposed regime for enhanced Pension Protection Fund (PPF) coverage, though it is still exploring a potential public consolidator operated by the PPF. The reforms will be included in the forthcoming Pension Schemes Bill, due before Parliament by 22 July.
3. Industry praises ‘bolder than expected’ DB surplus plans
Industry experts have broadly welcomed the Government’s planned reforms to surplus extraction in defined benefit (DB) pension schemes. As outlined in the Government’s consultation response – and set to be included in the forthcoming Pension Schemes Bill – trustees will gain new statutory powers to modify scheme rules to enable surplus release. The funding threshold will also be lowered to a low dependency basis, making it easier for well-funded schemes to return surplus funds to employers or reinvest them for member benefit.
Industry groups have called the reforms ‘bolder than expected.’ The Pensions and Lifetime Savings Association (PLSA) said the changes could allow schemes to enhance member benefits, support contributions to defined contribution (DC) pensions and unlock long-term capital for investment in areas such as infrastructure.
The Society of Pension Professionals and firms including Isio, LCP and Broadstone highlighted that the reforms retain vital safeguards, with trustees maintaining discretion and extraction still subject to actuarial assessment. Many also welcomed the Government’s decision to abandon plans for a 100% PPF underpin, citing cost and complexity concerns.
While the campaign group Pension Security Alliance has warned of potential risks to member outcomes, industry voices are largely optimistic. They believe the proposals could reshape DB strategy, incentivise sustainable investment and rebalance the role of surpluses, all while keeping member protection at the heart of trustee decision-making.
4. Campaign group warns DB reforms put 'millions of peoples' pension incomes at risk'
The Pension Security Alliance (PSA), the newly formed campaign group which includes pension providers, advocacy groups and industry experts, has warned that making it easier for employers to access surplus funds in defined benefit (DB) pensions could jeopardise the retirement incomes of millions.
Central to the proposals is the new statutory power for trustees to amend scheme rules, enabling surplus payments to sponsoring employers or members under certain conditions. The PSA claims this undermines the core purpose of DB pensions: to provide secure, guaranteed income to members. In a launch statement, the PSA warned, ‘Pension schemes exist to pay the pensions of workers who have earned their retirement income… They're not piggybanks for others to dip into. Millions of people rely on these schemes for their retirement income. It's not right for ministers to put those pensions at risk like this.’
The PSA continued, ‘The Government's own proposal document admits that extracting cash from pension schemes increases the risk that schemes won't be able to pay pensions in full. Instead of pushing ahead with these risky plans, we urge ministers to think again and listen to the millions of people who want them to put the security of their pensions first.’
The group has also criticised the lack of member engagement, highlighting that only five individuals with DB pensions were consulted during the policy process. It is calling on members to raise concerns with their MPs and scheme trustees.
5. DB surpluses spark strategic shift as reforms pave way for release
As defined benefit (DB) pension schemes continue to report record funding levels, Government plans to ease access to scheme surpluses are prompting a significant shift in corporate strategy and trustee focus.
The upcoming Pension Schemes Bill, expected before the summer recess, will introduce long-anticipated reforms allowing surplus funds to be returned to employers or used to enhance member benefits, provided schemes are well-funded and trustees agree it is safe to do so. These changes follow Government analysis revealing a combined £160bn surplus across UK DB schemes, reflecting a decade of improving funding positions.
According to the Society of Pension Professionals (SPP), 45% of pension professionals said that around half of the DB schemes they’re advising on are expected to have a surplus of 5% or more. A further 32% said that more than half of their schemes were likely to be in this position, while 22% reported only a minority, and just 1% said none.
Research from Brightwell found that 93% of UK firms with DB schemes over £500m plan to request surplus access once the rules change. Many are already weighing up how best to use the funds: nearly half aim to reinvest in UK operations, while others plan to support members, DC pensions, or distribute funds to shareholders.
The reforms are encouraging more schemes to run on rather than buy out. A third of sponsors say surplus access changes make running schemes on more attractive, potentially supporting more dynamic investment strategies. Yet a LawDeb survey revealed over a third of schemes remain uncertain about how to use surpluses, with trustee caution and advisory costs often holding back action.
Industry figures agree that member security must remain paramount. Many support further measures, such as stronger PPF protections, to reassure trustees. As Hymans Robertson and Insight Investment noted, unlocking surplus capital could benefit both pensioners and the wider economy, but success will hinge on prudent governance and clear regulatory guidance.
Commenting on the Pension Schemes Bill, Luke Carter, Regulatory Consultant at Equiniti said:
The Pensions Bill outlines initial protections – we await further legislation to ensure what additional protections are put in place to safeguard trustees from undue pressure from scheme sponsors and employers to share any surplus beyond their investment and run-off plans”
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