Surplus Flexibilities for Defined Benefit Pension Schemes: Unlocking Value for Employers and Scheme Members
Published 10 June 2026
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Draft Regulations: The Occupational Pension Schemes (Payments to Employer) Regulations 2027
Ministerial foreword
Our pension landscape is seeing significant change. One of the most significant changes is that funding in Defined Benefit (DB) pension schemes has strengthened markedly in recent years. Around 4 in 5 schemes are now in surplus, with an estimated total in aggregate of around £160 billion[footnote 1]. This is a significant and very welcome change from the funding challenges many schemes faced in the past.
This improvement brings opportunities for both employers that sponsor DB schemes and their members. Alongside this, we know that millions of people depend on DB pensions for a secure retirement, and protecting members’ benefits must remain the top priority. Where schemes are well-funded, trustees should have the flexibility to take decisions that reflect their circumstances and can support long-term growth, including investment in the wider economy.
The Pension Schemes Act 2026 was designed to reflect this new reality. It allows, with strict safeguards, for surplus to be shared between sponsoring employers and members. This represents a more modern and proportionate framework.
The draft Regulations set out clear safeguards that must be met before any surplus can be released. Trustees will be the key decision takers and strong funding levels must be maintained. They will need to consider their long‑term plans and the best interests of members, supported by the funding framework and regulators’ guidance.
Trustees are likely to choose different approaches, including phased release, support for scheme funding, or discretionary improvements for members. Open schemes may also see benefits through lower contributions rather than releasing surplus.
Our aim is to strike the right balance between strong protection for members and appropriate flexibility for trustees, while unlocking value for both employers and scheme members.
I welcome views on these proposals.
Torsten Bell MP
Minister for Pensions
Introduction
This consultation seeks views on proposed draft Regulations which set out the conditions that must be met for trustees of Defined Benefit (DB) pension schemes to make a surplus payment to the sponsoring employer.
Subject to the outcome of this consultation and Parliamentary approval, the Regulations will partially revoke the current Occupational Pension Schemes (Payments to Employer) Regulations 2006 (“2006 Regulations”) and set out the details of new surplus requirements introduced by the Pension Schemes Act 2026. The 2006 Regulations will remain in force in relation to the application of section 76 of the 1995 Act.
This consultation document includes:
- Chapter 1 – a brief background and summary of the work on DB surplus to date.
- Chapter 2 – citation, commencement and interpretation – setting out the title and commencement date for the Regulations and outlining the definition of relevant actuary for the purpose of these Regulations.
- Chapter 3 – Restrictions on the power to pay surplus to the employer which sets out the safeguards that aim to ensure that the benefits promised to members remain secure; and describes which schemes can release surplus. It provides the rationale behind the regulations which stipulate the process to release surplus, including notifications to members and to The Pensions Regulator (TPR).
- Chapter 4 – Multi-employer schemes – explains how the new regulations will work within multi-employer schemes.
- Chapter 5 – Exemptions and modifications – this relates to section 36B of the Pensions Act 1995 – the power to modify a scheme to allow for payment of surplus to employer – specifying which schemes cannot use this power. This chapter also specifies which schemes are unable to make a surplus payment under section 37 in the same Act.
- Chapter 6 – Amendments – providing the detail on changes proposed to the Occupational Pension Schemes (Revaluation) Regulations 1991, the Occupational Pension Schemes (Transfer Value) Regulations 1996, the Occupational Pension Schemes (Payments to Employer) Regulations 2006, and the Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014.
- Chapter 7 – Schedule – details the information on the actuarial certificate.
- Chapter 8 – Business Burdens and Regulatory Impacts – summarises the Impact Assessment and outlines the purpose of the changes to the surplus regulations.
- Annexes – includes the consultation questions, draft Regulations, Keeling Schedule and an illustrative surplus journey.
Who this consultation is aimed at
We expect this consultation to primarily be of interest to:
- sponsoring employers of DB pension schemes
- trustees of DB pension schemes
- DB pension scheme managers and service providers, and other industry bodies and professionals
- members of DB pension schemes
- groups representing members of DB pension schemes
- administrators of DB pension schemes
Purpose of the consultation
This consultation seeks your views on the draft surplus regulations known as The Occupational Pension Schemes (Payments to Employer) Regulations 2027.
Scope of the consultation
This consultation applies to England, Wales and Scotland. Occupational pensions are a devolved matter for Northern Ireland. It is anticipated that Northern Ireland will make corresponding legislation.
How to respond to this consultation
You can respond to this consultation using the online form available at: Surplus Flexibilities for Defined Benefit Pension Schemes Consultation Response.
We encourage all respondents to use the online form where possible. If you are unable to use the online form, you can submit your response by e-mail to: pensions.surplusconsultation@DWP.gov.uk
Please submit your response using only one method (either the online form or e-mail). This will help us avoid duplicate responses.
Government response
We will aim to publish the government response to the consultation on the GOV.UK website. The consultation principles encourage departments to publish a response within 12 weeks or provide an explanation as to why this isn’t possible. Where a consultation is linked to a statutory instrument, responses should be published before or at the same time as the instrument is laid.
Duration of the consultation
The consultation will run for 12 weeks, beginning on Wednesday 10 June 2026 and running until 11:59pm on Wednesday 2 September 2026. This is a final deadline and there is no capacity to extend beyond this deadline. Any responses received after will not be considered.
How we consult
Consultation principles
This consultation is being conducted in line with the revised Cabinet Office consultation principles[footnote 2] published in March 2018. These principles give clear guidance to government departments on conducting consultations.
Feedback on the consultation process
We value your feedback on how well we consult. If you have any comments about the consultation process (as opposed to comments about the issues which are the subject of the consultation), including if you feel that the consultation does not adhere to the values expressed in the consultation principles or that the process could be improved, please address them to:
DWP Consultation Coordinator
Legislative Strategy Team
4th Floor, Caxton House
Tothill Street
London
SW1H 9NA
Email: caxtonhouse.legislation@dwp.gov.uk
Data Protection and Confidentiality
The information you send us may need to be passed to colleagues within the Department for Work and Pensions, published in a summary of responses received and referred to in the published consultation report.
All information contained in your response, including personal information, may be subject to publication or disclosure if requested under the Freedom of Information Act 2000. By providing personal information for the purposes of the public consultation exercise, it is understood that you consent to its disclosure and publication. If this is not the case, you should limit any personal information provided or remove it completely. If you want the information in your response to the consultation to be kept confidential, you should explain why as part of your response, although we cannot guarantee to do this.
To find out more about the general principles of Freedom of Information and how it is applied within DWP, please contact the Central Freedom of Information Team: Email: freedom-of-information-request@dwp.gov.uk
The Central Freedom of Information team cannot advise on specific consultation exercises, only on Freedom of Information issues. Read more information about the Freedom of Information Act.
Chapter 1 – Background
1.1 The Pension Schemes Act 2026 (“the Act”) introduced changes that enable more trustees of well-funded DB schemes the flexibility to share surplus funds with sponsoring employers, subject to safeguards that protect members’ pensions.
1.2 As set out in the government’s response to the Options for DB Schemes Consultation in May 2025[footnote 3], changes in the Act will unlock the government’s aim to bring greater choice for DB schemes, enabling more trustees of well-funded schemes to share surplus funds. Surplus funds could be used to benefit employers, enabling business investment, as well as scheme members. Within existing legislation, only DB schemes which have already passed a resolution by 2016 can release surplus, even if both the scheme sponsor and trustees agree to this. The changes introduced by the Act will allow trustees to modify their rules, both for schemes with no current powers to make surplus payments to the employer, and for schemes with existing rules where there may be barriers within their own rules to release surplus.
1.3 The positive aggregate funding position of DB schemes offers greater choice for trustees and their sponsoring employers, with changes to surplus rules broadening the range of options available to them. However, funding levels can be volatile and schemes will need to continue to manage uncertainties and potential future risks. The revised DB Funding Code, which came into effect in November 2024, provides guidance on the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 (“2024 Regulations”). It underpins these changes and requires schemes to set out their plan for delivering benefits over the long-term through their funding and investment strategy.
1.4 The Act contains key safeguards on the use of surplus powers. Firstly, embedded within the Act, the modification powers and ability to pay surplus to the employer, are held by trustees. Trustees must comply with their existing duties to act in the interests of scheme beneficiaries. The Act requires regulations to be made prohibiting a surplus payment unless prescribed conditions are met in relation to the scheme’s funding level. Regulations must also require actuarial certification and that members are notified before a payment is made. The detailed restrictions on these payments, which protect the integrity of the scheme and members’ interests, are found in the draft Regulations.
1.5 The Chancellor announced changes to tax legislation at the Autumn Budget 2025[footnote 4] to allow direct surplus payments to members that will be treated as authorised payments for tax purposes. Where trustees meet the conditions for making a payment of surplus to the employer, the government expects them to consider how members might also benefit from any surplus release. HMRC will consult separately on those tax changes. This is in addition to the existing option for trustees to use surplus to augment, or improve, members’ benefits, for example by providing for pre-1997 indexation where not directly provided for. The draft Regulations also make consequential amendments to DWP legislation to support these new flexibilities. Taken together, these changes should better enable trustees to consider and, where appropriate, negotiate improved member outcomes with the sponsoring employer.
1.6 There are key changes in the draft Regulations to the existing Occupational Pension Schemes (Payments to Employer) Regulations 2006 (“2006 Regulations”). These are covered in discussion of the draft Regulations. In addition to the changes in the Act, the draft Regulations bring about the following changes to the existing regime:
(i). A proposed change to the funding threshold for surplus payments. Following the 2025 Options for DB Schemes Consultation and extensive stakeholder feedback, we are confident that full funding on low dependency is the right threshold for surplus extraction. This is different from the existing Regulations, where a buyout basis funding test is used. Low dependency funding is a robust and prudent threshold which aligns with the existing requirement for scheme funding under the 2024 Regulations. These Regulations aim to ensure that by the time the scheme matures, it is largely independent of the employer. Low dependency funding requires trustees to set their assumptions prudently. Their scheme’s liabilities are valued using these assumptions to ensure that under most reasonably foreseeable scenarios, there will be enough resources to pay member benefits in full without any further support being required from the sponsoring employer. In this way, it sets a minimum and a scheme’s funding above its low dependency liabilities represents the surplus available that can be considered by trustees for release.
(ii). A forward-looking element is introduced to the funding test for surplus release. This is because the security of benefits in a scheme is not only determined by the funding position at the time of the release but also whether any surplus release meaningfully impacts future scheme funding. This additional test provides trustees with further assurance that, where they choose to release surplus to the employer and/or to members, such a release will not unreasonably threaten the scheme’s funding position over time. Any forward-looking test needs to be practical to meet and pertain to a reasonable time period. Following engagement with industry, we consider the 3-year forward-looking test proposed in these regulations to be a proportionate approach that balances member security with greater flexibility.
(iii). A more structured approach is introduced to surplus release to balance flexibility for trustees with assurance for members and protection of member benefits. Under this approach, following initial discussions regarding surplus release between trustees and the employer, trustees are expected to obtain appropriate advice as well as an actuarial assessment of the scheme’s funding level. Following actuarial confirmation that the scheme is sufficiently funded, the trustees and employers may agree to a provisional amount of surplus for release. Trustees are then required to notify members of the planned surplus release at least 3 months in advance of the intended payment date, before final actuarial certification of the payment amount. After a payment is made, trustees are required to notify TPR of the payment, specifying the amount of surplus released to the employer and any payments or benefit enhancements made in connection with that payment to scheme members. This approach balances increased flexibility around surplus release with robust but proportionate member protections, enabling trustees and employers to pursue surplus release with confidence where this is appropriate.
1.7 To help explain how the draft Regulations operate in practice, we have included in the Annex an illustrative surplus journey, showing the typical stages trustees and employers are likely to go through when considering surplus release. This is not intended to prescribe a specific process, but to support understanding of how the regulatory requirements fit together.
1.8 We intend for the Regulations to come into force in April 2027, following consideration of responses to this consultation and subject to Parliamentary approval. There are no transitional measures associated with the Regulations and any release of surplus between now and April 2027 will remain subject to the existing regime as set out in the 2006 Regulations. TPR will consult later this year on guidance outlining factors for trustees to consider on surplus release and how to meet these regulations. Following HMRC’s consultation, the Finance Bill 2026-27 will set out further details of amendments to the tax legislation to treat member surplus payments as authorised payments. Together, this package is expected to come into force in April 2027, providing a clear and coherent framework to support trustees in making informed endgame decisions.
1.9 Throughout the development of the draft Regulations, we have engaged with our stakeholder communities, alongside TPR, the Pension Protection Fund (PPF) and the Financial Reporting Council (FRC). This engagement builds on earlier policy development, including the 2023 Call for Evidence on Options for DB Schemes[footnote 5] and the subsequent 2024 Consultation on Options for DB Schemes[footnote 6], both of which sought views on the treatment of scheme surplus and appropriate safeguards for members. We would like to thank all those who have shared their views with us so far and for their continued engagement as part of the formal consultation process.
1.10 We plan to make separate provision for surplus release from DB superfunds. Superfund schemes operating under the Regulator’s interim regime will initially be excluded from section 37 of the Pensions Act 1995 and the ability to pay surplus. This is reflected in the draft Regulations. However, when the statutory authorisation and supervisory framework for DB superfunds come into effect, separate provision will be made for the terms of surplus release. From that date, surplus release from superfund schemes will be permitted, subject to different regulatory conditions and a stricter funding test. We will consult on these proposals in a forthcoming consultation on DB superfunds.
1.11 The following chapters set out a commentary on the draft Regulations, broadly following the order of the accompanying draft Statutory Instrument. This approach is intended to describe the policy clearly and logically for stakeholders to consider the consultation questions. It is not to be taken as an authoritative interpretation of the law.
Chapter 2 – Preliminary
2.1 This Chapter explains Part 1 of the draft Regulations, which provides the title, commencement date and key definitions.
Citation, commencement and extent
2.2 Regulation 1 provides the title and commencement of the Regulations in regulation 1(1) and sets out their territorial extent in regulation 1(2).
Interpretation
2.3 Regulation 2 provides an interpretation of terms used in the draft Regulations. While some are carried forward from the 2006 Regulations, new terminology has been introduced in regulation 2(1) including “appropriate advice”. The term relating to appropriate advice has been defined to ensure that asset valuations are undertaken by appropriately qualified persons, which may include investment advisers.
2.4 Regulation 2(2) provides how certain references operate for schemes without active members.
Question 1: Draft regulation 2 defines ‘appropriate advice’. Do you agree with this definition?
The Relevant Actuary
2.5 Regulation 3 sets out who may act as the “relevant actuary” for the purposes of assessing whether a scheme is suitably funded to release surplus. This is consistent with the equivalent provision in the 2006 Regulations and, in most DB schemes, will be the scheme actuary appointed under section 47 of the Pensions Act 1995 (“the 1995 Act”).
2.6 Regulation 3(a) provides that, where a scheme is required to appoint an actuary, the relevant actuary is the scheme actuary. Regulation 3(b) provides that, where a scheme is exempt from this requirement, the relevant actuary must be a Fellow of the Institute and Faculty of Actuaries.
Chapter 3 – Restrictions on power to pay surplus to employer
3.1 This Chapter explains Part 2 of the draft Regulations, which sets out the conditions that must be met before surplus can be released. This includes a requirement for trustees to obtain an actuarial assessment which must confirm that the scheme meets the required funding threshold for surplus release, namely that it is funded at least to its low dependency funding level. This links directly to the existing funding requirements under the 2024 funding regime, which are designed to ensure that schemes are sufficiently funded to provide for accrued pension rights over the long term, without the expectation of further employer support. Actuarial certification must also confirm that the scheme is not only above this threshold at the time of release but is expected to remain at or above it over the following 3 years.
3.2 Unlike the current regime, where an actuarial certificate may set a maximum payment and remain valid for up to 15 months, the draft Regulations require any surplus payment to be made shortly after certification. This ensures that surplus release reflects the scheme’s most up‑to‑date funding position. We have engaged with industry on this shorter payment window and have received assurance that it is workable in practice and strikes an appropriate balance between flexibility for trustees and actuaries and the protection of scheme funding. This change, alongside the forward‑looking funding test, helps ensure decisions are based on up‑to‑date funding information. Members and TPR will continue to be notified, with additional information required to support monitoring of surplus use.
Restrictions on the exercise of the power referred to in section 37(1)(a)
3.3 Regulation 4 outlines the schemes where trustees may decide to use the power to pay surplus to the employer. The Regulations limit this to schemes that have a sponsoring employer and are subject to the scheme funding framework under Part 3 of the Pensions Act 2004, or to earmarked schemes (discussed later in this Chapter). This is intended to ensure that surplus is released only where there is a clear funding framework and governance structure supporting the decision. Regulatory own funds schemes also remain excluded, as they do not have an employer to whom surplus can be paid. In addition, earmarked schemes are now required to notify the Regulator when surplus is released.
3.4 Regulation 4(1)(a) provides that the power referred to in section 37(1)(a) of the 1995 Act may only be exercised by schemes subject to Part 3 of the Pensions Act 2004, while regulation 4(1)(b) provides that earmarked schemes are also within scope. Regulation 4(2) sets out the provisions that schemes within regulation 4(1)(a) must comply with, and regulation 4(3) sets out the provisions applying to earmarked schemes. Regulation 4(4) defines a “regulatory own funds scheme” for these purposes.
Question 2: Is the scope of the power sufficiently clear?
Question 3: Regulatory own funds schemes were included in the 2006 Regulations; is there a continued need for their inclusion within the Regulations?
Actuarial Assessment
3.5 Regulation 5 introduces the actuarial assessment which is applicable to schemes subject to Part 3 of the 2004 Act. The assessment can be undertaken as either part of the triennial valuation or at any other time, supporting a more flexible approach to surplus release. The government recognises that some trustees may be interested in releasing surplus over a period of years, rather than all at once. This approach supports that ambition by not requiring audited asset and liability values in order to meet the requirements of the actuarial assessment. It also sets the revised funding threshold, moving from the buyout basis used in the 2006 Regulations to a low dependency funding basis set out within the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024.
3.6 Regulation 5(1) requires trustees to obtain an actuarial assessment of the value of the scheme’s assets and the amount of its liabilities from the relevant actuary before exercising the power to pay surplus to the employer to ensure there is a robust assessment of the current financial situation of the scheme. Regulation 5(2) provides that this assessment may be obtained as part of the triennial valuation or at any other time, allowing flexibility in when surplus may be considered. Regulation 5(3) requires trustees to specify the “effective date” for the assessment. Regulation 5(4) requires the actuary to undertake the assessment as at that date, using the value of the assets provided and determining liabilities on the low dependency basis. Regulation 5(5) sets out how accrued rights that are in the process of being transferred should be treated for the purposes of the assessment. This treats transfers as remaining in the original party’s assets until the transfer is complete.
3.7 Regulation 6 requires that trustees take appropriate advice as defined in regulation 2(1). It then provides that trustees must inform the actuary of the value of the scheme’s assets to be used for the assessment, subject to specified exclusions in regulation 6(b)(i) to (iii). By carrying out this action the trustees confirm which assets are to be included and the current record of the value, ensuring accuracy in finances and helping to support surplus decisions and maintain long-term security of the scheme.
3.8 Regulation 7 sets out the liabilities that must be considered. Regulation 7(1)(a)(i) and (ii) set out that liabilities to be taken into account are accrued rights to future benefits and entitlement to present pension and benefits for members. 7(1)(b) sets out how the liabilities for survivors should be treated. These rights include a pension credit right as outlined under regulation 7(3). Regulation 7(2) sets out how rights under an insurance policy may be treated, including where these may be excluded with the agreement of the actuary. This ensures that the assessment of liabilities also remains accurate. Draft regulation 7(3) provides further definitions and interpretation relevant to this regulation.
Question 4: Do you have any comment on the considerations of factors to be taken into account for the assessment of assets and liabilities?
Question 5: Do you have views on the proposed funding test, based on full funding on the low dependency funding basis?
Trustee Proposal for Payment of Surplus to the Employer
3.9 Regulation 8 sets out the process trustees must follow when proposing a payment of surplus to the employer. This provision sets out that the trustee will agree a provisional amount to be released to the employer, together with the conditions attached to releasing surplus. The amount is described as provisional because it does not become final until the certificate is signed. Agreement with the sponsoring employer is required, reflecting the employer’s ongoing funding responsibilities to the scheme. Trustees may also wish, at this stage, to consider and agree, how any surplus could be used to enhance member benefits.
3.10 The valuation establishes a minimum threshold above which surplus may be released but that does not mean it has to be released at that level. In considering the amount of surplus to be released, trustees and employers will need to determine the level of buffer they consider appropriate above the minimum funding threshold. This will be influenced by their long‑term objectives for the scheme. TPR has already published guidance for trustees and employers on endgame planning and will consult on further guidance.
3.11 Regulation 8(1) provides that trustees may decide on a provisional amount to be paid to the employer after obtaining an actuarial assessment from the actuary, and 8(1)(b) confirms that the assessment should indicate the funding level of the scheme is above full funding on the low dependency funding basis. Trustees are not required to make a surplus payment where an assessment is made and accordingly the draft Regulations are permissive that trustees may decide a provisional amount. As set out above, we believe this funding basis is a robust and prudent threshold, allowing additional flexibility around surplus release while protecting member benefits.
Question 6: Do you have any views on the proposed payment process as proposed in the regulations, including whether it is workable in practice and sufficiently clear? Please provide details.
Conditions for Payment of the Employer
3.12 Regulation 9 sets out the conditions that must be met before surplus can be paid to the employer. Release of surplus cannot take place unless conditions one and two are met, ensuring the actuary is satisfied the scheme has the correct funding, both now and in the future. Trustees can make a payment to the employer if they meet the specified requirements.
3.13 Regulation 9(1) requires the following conditions are met:
-
condition 1 (regulation 9(2)) states the amount must be greater than the amount of the liabilities as detailed on the actuarial assessment
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condition 2 (regulation 9(3)) requires that this position remain as likely as not at any given time over the next 3 years
3.14 Regulation 9(4) requires trustees to have obtained an actuarial certificate, that members have been notified as per regulation 11 and that the employer to have agreed the provisional amount. Regulation 9(5) provides that where the trustees decide to make a payment to the employer, it must be made within 5 working days of the date of the actuarial certificate. Regulation 9(6) defines ‘working days’.
3.15 Under the current regime, a certificate sets a maximum amount that may be released and this may remain valid for up to 15 months, with no formal requirement to reassess funding. Under the new approach, trustees agree a provisional amount, which is notified to members at least 3 months before release date, and the actuary must confirm at the point of certification that the scheme continues to meet the required funding conditions, taking account of any material developments since the original assessment. The actuary must be satisfied that it is at least as likely as not that the scheme remains at least fully funded on the low dependency basis at any point in the 3-year period following surplus release. We are confident this new approach strikes the right balance between increased flexibility for trustees with respect to surplus release and robust protections for members.
3.16 The introduction of a 3-year forward-looking test will indicate the scheme is expected to remain at this funding level once surplus has been released. The 3-year period has been used as it falls in line with the triennial valuation that is undertaken and is a reasonable timeframe for actuaries to consider future developments. FRC will provide further guidance to help actuaries in carrying out the necessary work for these assessments in a proportionate manner.
3.17 Under Regulation 9(5), trustees are required to release the surplus funds to the employer within 5 working days of the date of the actuarial certificate. This is to ensure that the most current financial assessment is applied when the funds are released. It also ensures that this process is efficient at releasing the funds and encourages schemes to review their situation more frequently because the process is not extended by a long payment schedule.
Question 7: Are the regulations clear on the process of obtaining actuarial certification and paying the employer within 5 working days?
Question 8: Do you have any comments on the proposed 3‑year forward‑looking assessment in Condition 2?
Question 9: Do you agree that the process proposed in the regulations is sufficiently flexible to enable a phased release of scheme surplus over a number of years, while preserving member benefits via certification of each individual payment?
Earmarked Schemes
3.18 Regulation 10 sets out the conditions that must be met for a payment of surplus to be made to the employer in relation to an earmarked scheme. An earmarked scheme is a specific insurance policy held by a pension scheme, designed to provide life assurance cover or a tailored annuity for a specific, individual member.
3.19 Earmarked schemes are included within scope of these new draft Regulations, as they were included in the 2006 Regulations, alongside DB schemes that are subject to scheme funding rules. A surplus could, for example, occur in these schemes historically when schemes limited refunds on short service to member contributions only, resulting in employer contributions remaining in the fund. We recognise the current Defined Contribution market has evolved significantly since the 2006 Regulations and would welcome comment on whether these should remain subject to these Regulations. They are exempt from requiring an actuary in most cases under regulation 3(2) of the Occupational Pension Schemes (Scheme Administration) Regulations 1996, although for any surplus to be released, the Regulations will require trustees to take appropriate advice. Earmarked schemes will now also be required to notify TPR if surplus is released. This will enable continued regulatory oversight on surplus release.
Question 10: Should earmarked schemes be included in the scope of these regulations?
Notification to Members
3.20 Regulation 11 sets out the requirements for notifying members of a proposed payment of surplus to the employer. Regulation 11(1) requires a written statement to scheme members. The statement includes the trustees’ decision to release surplus, states the intended date for payment and the amount that will be released. If trustees intend to award enhancements to benefits, this will be included in the written statement (regulation 11(1)(a) to (c)).
3.21 Regulation 11(2) is consistent with existing Regulations with the requirement to send the written statement to members at least 3 months before the trustees plan to release surplus. Regulation 11(3) provides that trustees do not have to send the written statement to any member who does not have a current notified address and any recent correspondence has been returned from that address. Regulation 11(4) clarifies how trustees may notify the member.
3.22 The 3-month notice period reflects the 2006 Regulations, ensuring sufficient time for members to communicate with trustees over the decision, although the final decision to release surplus will remain solely in the hands of the trustee. Where enhancements to member benefits have been agreed, this may also be included in the notification. TPR guidance will provide further details about how trustees could approach the notification to members of the enhancement of their benefits.
3.23 Members can still request an actuarial certificate when it is issued but this will not be available at the time of the written statement of intent. The actuarial assessment provides the scheme’s funding level at a point in time and will be prepared ahead of the 3‑month member notice period. However, this is not the final confirmation for the purposes of a surplus payment, which is provided by the actuarial certificate.
Question 11: Do you think the notification requirements in regulation 11 are sufficiently clear?
Notification to the Regulator
3.24 Regulation 12 sets out the information that must be sent to TPR within one week of the payment being made. While existing regulations require trustees to notify TPR when surplus has been released, there is no requirement to provide any details of the surplus released. To provide increased regulatory oversight by TPR, and to aid understanding of how surplus is being used, the regulations now require further details to be provided within a week of payment to the employer, ensuring that records are accurate. The details of what must be in the notification are described in regulation 12. The regulator must be notified of the amount of the scheme’s assets and liabilities, and the amount that the assets exceed the liabilities on a low dependency basis, as well as the effective date of the actuarial assessment and the amount of payment to the employer as shown in regulations 12(a)-(d). Regulations 12(e)-(f) require details and value of any member benefit enhancements awarded, and the value and details of any authorised member surplus payments.
3.25 Further guidance will be provided by TPR to inform trustees about requirements in Spring 2027.
Question 12: Do you think the notification requirements in regulation 12 are sufficiently clear?
Chapter 4 – Multi-employer schemes
4.1 This Chapter explains Part 3 of the draft Regulations. It provides for the application of sections 36B and 37 of the 1995 Act in relation to a scheme with more than one employer.
Schemes with more than one employer
4.2 The application of regulation 13 reflects the 2006 Regulations, with the addition that a sectionalised scheme can use the modification power in new section 36B of the Pensions Act 1995 (introduced by the 2026 Act), as if each section were a separate scheme. This ensures schemes which have substantial surplus are not prevented from using it within the multi-employer scheme. It allows schemes with legacy rules (for example, from past mergers) that restrict surplus sharing to use the Regulations to amend those rules without rewriting the whole scheme.
Question 13: Are the proposed rules for sectionalised schemes and employer consent workable and clear?
Chapter 5 – Exemptions and Modifications
5.1 This Chapter explains Part 4 of the draft Regulations, which modifies the application of sections 36B and 37 of the 1995 Act to specific schemes and in certain circumstances. Schemes in wind-up are not covered by these regulations.
Application of section 36B to schemes
5.2 Regulation 14 is an entirely new regulation which relates to section 36B. Regulation 14 prevents the schemes excluded by paragraphs (a) to (c) from using the power in section 36B to modify their schemes. This ensures that there is alignment with regulation 15, which stops those same schemes from being in scope of section 37. Schemes with a crown guarantee, or schemes that are not subject to Part 3 of the 2004 Act, or are earmarked schemes are excluded from the section 37 requirements because they are subject to separate statutory regimes.
Application of section 37 to schemes
5.3 Regulations 15 and 16 are built from the 2006 Regulations, with some key differences.
5.4 Regulation 15(1) prevents the schemes excluded by paragraphs (a) to (d) from making a surplus payment under section 37 of the 1995 Act. This is where under Regulation 15(1)(a) there is a Crown Guarantee, under Regulation 15(1)(b) releasing surplus or assets on winding up are subject to a Crown Guarantee and under Regulation 15(1)(c) schemes do not fall into the definition in draft regulation 4(1). Regulation 15(1)(d) prevents a ‘superfund scheme’ from releasing surplus under section 37. 15(2) clarifies that sections within a scheme that do not have a Crown Guarantee will be treated as separate schemes.
5.5 Section 37(2B) of the Pensions Act 1995 requires regulations to be made prohibiting the making of a surplus payment unless the actuary is satisfied that prescribed conditions are met, members are notified and an actuarial certification is received. The policy is that earmarked schemes do not need to comply with these requirements. A modification was therefore required to the application of section 37(2B) to earmarked schemes, to comply with that section.
Question 14: Are the draft regulations clear for excluded schemes? If not, where would further clarity be helpful?
Chapter 6 – Amendments
6.1 This Chapter explains Part 5 of the draft Regulations, where changes are made to existing pensions legislation as a consequence of changes to the Finance Act 2004, and other minor consequential amendments. During our engagement with industry stakeholders, many called for a change in tax legislation to allow trustees to make lump sum payments to members as an authorised payment, becoming the ‘authorised member surplus payment’. The government listened to this feedback, and as a result the necessary changes will be made through tax legislation and be effective from April next year.
6.2 The tax legislation will be subject to certain conditions:
(i.) The scheme must be in surplus above the threshold we have set for surplus release.
(ii.) Payments can only be made to members above Normal Minimum Pension Age (NMPA). Trustees will still be able to award authorised member surplus payments to members below NMPA, but these will need to be deferred until the member reaches NMPA.
Amendment of the Occupational Pension Schemes (Revaluation) Regulations 1991
6.3 Regulation 17 inserts draft regulation 5A after regulation 5 of the Occupational Pension Schemes (Revaluation) Regulations 1991. This ensures that authorised member surplus payments, which are awarded and not paid until the member reaches NMPA, must be increased, at a minimum, by reference to the Act final salary method. This ensures the surplus remains a genuine addition to the member’s award. In contrast to existing regulations for revaluation of awards, the member can still be in pensionable service, but the revaluation will cease once the member reaches NMPA.
Question 15: Are the draft Regulations clear on revaluation of deferred awards?
Amendment of the Occupational Pension Schemes (Transfer Value) Regulations 1996
6.4 Regulation 18 inserts regulation 17A after regulation 17 of the Occupational Pension Schemes (Transfer Value) Regulations 1996 (S.I. 1996/1847). This makes it clear that a member will not be construed as continuing to accrue benefits for the purpose of transfer value legislation solely by virtue of being awarded a direct payment. This will ensure that the award of a deferred direct payment does not affect the members’ statutory right to take a transfer value.
Question 16: Are the draft Regulations clear on how deferred awards affect members’ statutory right to take a transfer value?
Amendment of the Occupational Pension Schemes (Payments to Employer) Regulations 2006
6.5 Regulation 19 revokes the 2006 Regulations to the extent of their application to section 37 (due to the new framework introduced by the Regulations). As the government has been clear on the anticipated timelines for these surplus changes, we do not consider that additional transitional arrangements are necessary.
6.6 There are changes to the Occupational Pension Schemes (Payments to Employer) Regulations 2006. These changes revoke the 2006 Regulations with reference to their application of section 37, while retaining them with regard to section 76 and schemes in wind-up.
Question 17: Do you foresee any issues or concerns arising from proceeding without transitional provisions following the revocation of the 2006 Regulations? If so, please provide details.
Amendment of the Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014
6.7 Regulation 20 revokes regulations 36 to 39 of The Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014 (“the 2014 regulations”), relating to transitional arrangements for cases where a scheme was treated as a money purchase scheme and a payment of surplus funds was made to the employer.
Question 18: Do you foresee any issues with revoking regulations 36 to 39 of the 2014 Regulations?
Chapter 7 – The Schedule
7.1 The Schedule sets out the information that the actuarial certificate must contain. Existing Regulations specify the form of the actuarial certificate. In the draft Regulations, there is no requirement for the format of the certificate, only what must be included in the certificate. The aim is to give more flexibility in how the release of surplus is notified while retaining the need to contain specific details.
Question 19: Does the proposed certificate in the Schedule capture all the relevant details that will be required?
Chapter 8 – Business Burdens and Regulatory Impacts
8.1 Taken together, the Regulations reflect the current improved DB funding landscape, providing greater choice for trustees and employers. These measures form part of a broader, pro‑growth reform agenda and are expected, where it is safe to do so, to unlock billions of pounds currently held within well‑funded DB schemes. By enabling surplus to be shared more flexibly between employers and members, the reforms provide sponsoring employers with the opportunity to reinvest released capital into their businesses, including through business expansion, productivity‑enhancing investment, job creation and higher wages. For members, authorised surplus payments and benefit improvements increase disposable income, supporting consumption and wider economic activity. In addition, the measures may encourage longer‑term investment strategies that support economic growth, while maintaining strong protections for members’ core pension benefits.
8.1 The Pension Schemes Bill Impact Assessment (IA)[footnote 7] provides an overarching assessment of the policy[footnote 8]. These regulations give operational effect to that framework; accordingly, the Pension Schemes Bill IA remains the primary analytical reference, with this consultation inviting evidence to refine key parameters (e.g., funding tests, timing and notifications). This was assessed by the Regulatory Policy Committee and found “fit for purpose”[footnote 9]. The overall assessment found a negligible cost on business (less than £1million direct costs a year) but may generate significant benefits to employers and members through the release of billions of pounds over the next ten years. If the final policy materially diverges from the Bill IA assumptions, we will update the analysis as required.
8.3 Following the announcement at Budget 2025 that authorised member surplus payments would become authorised payments; further analysis was published illustrating the impact of these payments[footnote 10].
Annex A – Consultation questions
Question 1: Draft regulation 2 defines ‘appropriate advice’. Do you agree with this definition?
Question 2: Is the scope of the power sufficiently clear?
Question 3: Regulatory own funds schemes were included in the 2006 Regulations; is there a continued need for their inclusion within the Regulations?
Question 4: Do you have any comment on the considerations of factors to be taken into account for the assessment of assets and liabilities?
Question 5: Do you have views on the proposed funding test, based on full funding on the low dependency funding basis?
Question 6: Do you have any views on the proposed payment process as proposed in the regulations, including whether it is workable in practice and sufficiently clear? Please provide details.
Question 7: Are the regulations clear on the process of obtaining actuarial certification and paying the employer within 5 working days?
Question 8: Do you have any comments on the proposed 3‑year forward‑looking assessment in Condition 2?
Question 9: Do you agree that the process proposed in the regulations is sufficiently flexible to enable a phased release of scheme surplus over a number of years, while preserving member benefits via certification of each individual payment?
Question 10: Should earmarked schemes be included in the scope of these regulations?
Question 11: Do you think the notification requirements in regulation 11 are sufficiently clear?
Question 12: Do you think the notification requirements in regulation 12 are sufficiently clear?
Question 13: Are the proposed rules for sectionalised schemes and employer consent workable and clear?
Question 14: Are the draft regulations clear for excluded schemes? If not, where would further clarity be helpful?
Question 15: Are the draft Regulations clear on revaluation of deferred awards?
Question 16: Are the draft Regulations clear on how deferred awards affect members’ statutory right to take a transfer value?
Question 17: Do you foresee any issues or concerns arising from proceeding without transitional provisions following the revocation of the 2006 Regulations? If so, please provide details.
Question 18: Do you foresee any issues with revoking regulations 36 to 39 of the 2014 Regulations?
Question 19: Does the proposed certificate in the Schedule capture all the relevant details that will be required?