The UK government has been urged to ensure its proposed defined benefit (DB) surplus regime protects members while preserving trustee discretion, with industry respondents calling for greater flexibility around funding buffers, phased payments and implementation requirements.

Responding to the Department for Work and Pensions’ consultation on surplus flexibilities for DB pension schemes, Pensions UK, Brightwell, the Association of British Insurers (ABI) and Hymans Robertson broadly welcomed the reforms, but warned that the framework must be workable in practice.

Pensions UK noted that greater surplus flexibility could provide trustees and employers with more options, particularly where well-funded schemes are considering running on rather than moving immediately to buyout.

Indeed, among surveyed members, 69 per cent supported the balance between safeguards and flexibility proposed in the draft regulations.

However, Pensions UK stressed that the proposed low dependency funding test should remain a minimum statutory threshold rather than creating an assumption that surplus should be released.

It argued that trustees should retain discretion to hold additional scheme-specific buffers, that advice requirements should be proportionate, and that the proposed five-working-day payment deadline following actuarial certification should be made more flexible.

Pensions UK also called for the regime to support phased surplus release through staged payments, formulas and escrow-type arrangements.

Pensions UK head of DB, investment and the LGPS, Tiffany Tsang, said: “Surplus should never be treated as automatically available or automatically distributable.

"Member security must remain central, and trustees need the ability to take account of the scheme’s long-term funding and investment strategy, the strength of the employer covenant and the risks that could emerge over time.”

Brightwell also supported low dependency as a basis for assessing surplus, but called for unnecessary administrative burdens around repeated notifications and approvals to be avoided.

Brightwell chief executive officer, Morten Nilsson, also questioned the exclusion of schemes with a Crown Guarantee from the proposed regime, arguing that this could undermine confidence in the reforms.

Meanwhile, the ABI called for a clearer, more measurable definition of low dependency, along with an additional funding buffer and resilience testing against longevity and market shocks.

ABI long-term savings policy adviser, Robyn Smith, commented: “Any changes to make it easier to extract surpluses from well-funded DB schemes must keep protecting scheme members’ benefits as the top priority.”

The ABI also warned about the interaction between surplus release and the Pension Schemes Act 2026 superfund gateway test, arguing that a scheme could potentially release surplus until buyout was no longer affordable before transferring to a superfund.

Hymans Robertson similarly welcomed greater flexibility but warned that an overly complex process could prevent schemes from using the new powers.

Hymans Robertson head of DB actuarial consulting, Laura McLaren, said: “The regulations answer how surplus can be released, but not whether it should be released in the first place. For many schemes, that’s the more important question.”

She added that forthcoming guidance from The Pensions Regulator should be principles-based rather than overly prescriptive, recognising that the appropriate surplus strategy would differ from scheme to scheme.

This article was originally published in our sister publication Pensions Age.

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