14 July 2026
Janet Brown, partner at Sackers, commented: “Hot on the heels of the DWP’s consultation on new regulations for releasing surplus from ongoing DB schemes (issued 10 June), HMRC has joined the summer of surplus consultation party, issuing its own consultation on enabling one-off lump sum payments to members out of surplus to be “authorised payments” under tax legislation. As expected, conditions will apply, including that payments can only be made once members have reached normal minimum pension age (NMPA) (or earlier on grounds of ill-health), but they can be agreed and held in deferment until the member reaches NMPA.
“HMRC’s policy document and draft legislation aligns with the DWP’s draft regulations on making payments to employers and/or members from surplus on an ongoing basis, with both being drafted on the basis that they come into force on 6 April 2027. With draft legislation now hurtling towards the statute books in time to meet that date, this means that currently the only other outstanding piece of the surplus release regulatory jigsaw is TPR’s draft guidance, which is expected later this year.”
Brown added: “The framing of the new member surplus option as a trustee discretion means that having a policy on surplus as part of a run-on agreement with the sponsor will be key. The introduction of the one-off lump sum payment will provide trustees with increased flexibility to share surplus with members, while not baking in additional liabilities into the long-term funding of their pension scheme.
“The industry was keen to have this new option introduced as an authorised tax payment and HMRC looks likely to deliver it in the Finance Bill 2026/27. For those schemes already looking at surplus release, this will provide an added string to their flexibility bow going forward.”
