DB pension scheme surpluses: consultation closes, debate develops, what are industry responses telling us?

The Department for Work and Pensions’ (DWP) Consultation on Surplus Flexibilities for Defined Benefit (DB) Pension Schemes under the Pension Schemes Act 2026 closed on 2 September 2026. In our previous blog, Pension Scheme Surplus Consultation – Draft Regulations, a Roundtable, and a Project Plan , we considered the consultation, the draft regulations and the practical steps trustees and employers may want to take when assessing whether surplus release could be available under their scheme.

Now that the consultation has closed, the focus and debate are shifting from what the Government proposed in its consultation to how the pensions industry is responding. The common theme across the industry appears to be one of cautious support: while increased flexibility is widely welcomed, industry professionals have raised concerns about trustee decision-making, member protection and whether the proposed framework will be effective in operation.

Background

DB pension schemes promise members a set level of pension benefits with the employer ultimately being responsible for ensuring there is enough money in the scheme to pay out those benefits. Historically, many schemes found themselves in funding deficits. More recently, however, many schemes have moved into stronger funding positions, which leads to the question: what should trustees, employers and policymakers do when a scheme can meet its members’ benefits and still have surplus assets?

The DWP’s consultation sought to address this question. The consultation proposed a new framework that aims to make it simpler for well-funded DB schemes to release their surplus. The aim is to unlock value for both employers and scheme members while maintaining appropriate protection for member benefits.

Responses in the industry

Industry responses have begun to show both where there is consensus and where concerns remain, as considered below.

Flexibility, not routine

Industry bodies are keen to support the idea of greater flexibility in dealing with surpluses but note that they do not want surplus releases to become automatic. There is hope across the industry that an appropriate balance can be struck between unlocking value from well-funded schemes and protecting members’ benefits. To achieve this balance, several industry bodies favour an approach where the required funding level opens the door to surplus release, rather than automatically requiring it. Trustees would therefore act as a safeguard, holding on to the ability to assess whether releasing a surplus is appropriate in the circumstances of their individual schemes.
Control, not compromise

The concerns above highlight perhaps the core theme of the responses to the consultation, namely that trustee control remains a fundamental factor in surplus decisions. Trustee representatives have emphasised that trustees should not be under pressure to release funds. Control should remain in the hands of trustees, creating an environment where they feel safe to make the appropriate decision for their scheme. Trustees should not only be able to decide whether a surplus should be released; they should also be able to decide how much should be released and how the money should be used. Trustees should still be able to freely prioritise the security of members’ benefits without facing external pressures.
Protection, not profit

The consultation aims to promote a balance where both employers and scheme members benefit from a surplus release. Responses indicate that, once released, surpluses should not flow directly back to the employer. Instead, industry bodies are advocating for fairer sharing of the surplus between employers and members. There is support for the idea that members could share in the surplus through authorised lump sum payments, for example. This could increase the likelihood of surplus releases, especially when trustees know that both parties would benefit from the release. Responses have highlighted that surplus distribution is not simply about unlocking value: fairness and benefit security must remain fundamental to any decision.
The real challenge: practical workability

Industry responses have also raised questions about how effectively the proposed framework will operate in practice. Industry bodies are concerned that the proposed system could be too rigid if it is mainly designed for one-off surplus payments, instead of allowing phased releases over time. If the process is too onerous for trustees, they may be hesitant to test the regime even where a surplus exists. The practicalities of how surpluses would be administered, communicated and recorded over time, as well as how changing member circumstances would be addressed, highlight the need for greater clarity throughout the framework and over the lifespan of a scheme. This reaffirms our previous blog’s message that trustees and employers will need to approach a surplus release carefully and strategically, rather than viewing it as a purely administrative exercise.

What happens next?

Trustees and employers will still be navigating the questions of whether a scheme meets any future funding requirements, how any surplus should be used and who should benefit from a release. Many schemes have yet to reach a decision on how any future surplus should be shared. An Aon survey found that, among schemes that have reached a decision, approaches varied considerably: some favoured employer-only access, others opted for member-only benefits and some chose to share the surplus between employers and members.

Attention will turn to the Government’s response and the final framework of regulations. Although the direction of reform is becoming clearer, the responses from the industry show that important questions remain around trustee autonomy, member safeguards and practical implementation. The consultation may have closed, but the debate over surpluses is just beginning.

If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the pensions team or your usual Brodies contact.