DB pension surplus: What do employers need to know?

At a glance

• The government has launched a consultation on draft regulations, which would make it significantly easier for trustees of well-funded defined benefit (DB) schemes to release surplus assets to sponsoring employers and members.
• The regulations are aimed at schemes that expect to be able to pay all promised benefits without needing further employer support. 
• Employers will be keen to understand whether they meet this ‘low dependency’ funding basis, as doing so may enable surplus assets to be returned and reinvested in the business.
• Trustees will remain the primary decision-makers, with actuarial certification required as a key safeguard.

What is the consultation about?

On 10 June 2026, the Department for Work and Pensions published a consultation on draft regulations the Occupational Pension Schemes (Payments to Employer) Regulations 2027, setting out the conditions for releasing surplus assets from an ongoing DB scheme. The regulations sit beneath the Pension Schemes Act 2026, which gives trustees a new statutory power to amend scheme rules to permit surplus payments, even where no power currently exists.

Why now?

DB schemes are in their strongest financial position for a generation. According to the Pensions Regulator, as of 31 December 2025, around 80% of DB schemes are in surplus, holding an estimated GBP160 billion on a low dependency basis. However, current legislation means that surplus assets are 'trapped' in many of these schemes and cannot be returned to employers or members. The government intends to amend the legislative framework to unlock these funds for employers, members, and the wider economy, while maintaining robust protection for members.

Key dates

The consultation closes on 2 September 2026. The new regime is expected to apply from April 2027, with further regulatory guidance to follow at the same time. HMRC will consult separately on tax changes to permit direct payments to members.

What should employers do now?

• Engage with trustees to verify whether the scheme is currently funded on a low dependency basis.
• Ask your legal advisers to review your scheme's rules to understand the terms of any existing surplus powers.
• Establish how the scheme surplus arose, by assessing the respective contribution levels paid by the scheme's employers and members.
• Take specialist advice as the interaction between the new proposals, scheme rules, trustee duties and tax on surplus payments is complex.

The government's proposals represent a significant turning point for DB schemes that have surplus assets 'trapped' in the scheme, which could be reinvested in the employer's business and / or shared with members. The employers who are best placed to benefit will be those that start planning now.

Contact us

For more information, please get in touch with Gary Davies or your usual DLA Piper contact.