13 May 2025
Sacker & Partners LLP (Sackers), the UK’s leading specialist law firm for pensions and retirement savings, today announced the results of their most recent webinar survey*. The results reveal that 54% of respondents support giving trustees the flexibility to determine whether – and on what terms – surplus funds can be paid to employers under any future surplus regime.
In February 2024, the Department for Work and Pensions (DWP) launched a consultation to gather views on proposals to simplify payments from DB scheme surpluses to both sponsors and members. Against the backdrop of an intervening General Election, things then went somewhat quiet. Finally, in January this year, the Chancellor announced plans to amend legislation to allow greater flexibility in how surplus from defined benefit (DB) pension schemes can be used, as part of broader efforts to stimulate UK economic growth. The government’s response to last year’s consultation is therefore expected imminently (‘spring 2025’) and is anticipated to bring greater clarity.
Partner Lucy Dunbar commented: “Our survey asked attendees for their views on the government’s proposed flexibilities – and it’s important not to underestimate the financial scale of what’s being discussed. According to The Pensions Regulator (TPR) estimates as at the end of 2024, 76% of DB schemes are currently in surplus on a low-dependency basis (no reliance on the employer), with over 50% in surplus on a buy-out basis. Furthermore, the government’s January announcement suggested that surplus is worth around £160 billion. That’s a significant sum.
“Our survey revealed surplus is largely being used to improve scheme security – around 29% being allocated to risk mitigation, with 23% covering scheme expenses. Only 2% is currently being paid to employers, with the remainder used for a mixture of purposes, including contribution holidays. The survey also found that 33% of respondents believe a more permissive surplus regime would influence their scheme’s endgame strategy – a potentially powerful lever for supporting the government’s growth agenda.”
Dunbar continued; “Allowing more flexibility could unlock significant capital for the UK economy. But this is a nuanced issue – on one hand, there’s the potential to return funds to employers; on the other, to enhance member benefits. Both options are under consideration, and it will be interesting to see how the final legislation balances these priorities.
– ENDS –
