18 April 2024
Sacker & Partners LLP (Sackers), the UK’s leading specialist law firm for pensions and retirement savings share their thoughts on the latest DB Options consultation.
Janet Brown, Partner said: “After decades in the wilderness, DB surpluses are back in business. The Government’s consultation on options for DB schemes, which closes tomorrow (19 April), explores how to remove practical (or as referred to in the consultation ‘behavioural’) barriers to returning surplus. Others may refer to it as case law in the area! With the current rules-based lottery governing what, if anything, can be done with a surplus on an ongoing or wind-up basis, making a level playing field with a statutory override to at least open a dialogue on using a surplus is an admirable aim.
The next question after ‘can we access the surplus?’ is…’should we?’ And, if so, ‘who is ‘we’?’ Trustees’ duties, set out in part in complex case law, will still have to be satisfied. But as schemes become increasingly mature, any proposal that will give trustees and sponsors more choice should be a welcome one, and managing surplus can be a key factor in any decision to run on. Where schemes are sectionalised, or the sponsor has several schemes, how to unlock the surplus for the benefit of members, the sponsor, and possibly other schemes in the sponsor’s group, may lead to creative discussions and proposals. These are far more interesting than just how long it would be to a potential buy-out. Whether these changes would achieve the Government’s ultimate goal of increasing investment in UK plc is, however, another question altogether.”
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