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Workplace Pensions: Reform

Answer

The Pension Schemes Act 2026 introduced reforms enabling more trustees of well-funded occupational Defined Benefit (DB) pension schemes to share surplus with employers and benefit members. Regulations will set out the conditions that trustees must meet before surplus can be released. These protections are designed to ensure that members’ promised benefits remain secure. The Department for Work and Pensions (DWP) is currently consulting on these draft regulations.

Decisions to share surplus will remain in the hands of scheme trustees, who must act in the interests of scheme beneficiaries. Employers will have no right to directly access surplus funds. The DB funding code and underpinning legislation, overseen by the Pensions Regulator (TPR), further require that trustees aim to maintain a strong funding position so they can pay members’ future pensions. TPR will provide guidance to trustees on which it will consult.

Member safeguards include a prudent funding threshold, actuarial certification including a forward-looking test, and prior notification to members. As part of the Pension Schemes Act 2026, the impact on member security was assessed. This found that the likelihood of members not receiving their benefits in full to be very low given the important role trustees will play in overseeing any decision.

DWP is working closely with TPR across the delivery of the Pension Schemes Act 2026 through legislation and guidance, including DB surplus. TPR oversee trust-based occupational pension schemes and enforce their compliance with pensions legislation.

All private sector DB schemes are in scope of the reforms, but it will be for individual schemes to decide whether to use these flexibilities. Around 4 in 5 DB schemes are now funded on a low dependency basis and therefore may be in a position to consider releasing surplus. The most recent analysis by TPR indicates that, as of December 2025, DB schemes had an estimated aggregate surplus of around £160 billion.

The Impact Assessment for the Pension Schemes Act 2026 estimated that £11.2 billion of additional surplus funds are expected to be released over a 10-year period as a result of this legislative change, based on assumptions about take-up and behaviour.

DWP recognises the importance of monitoring the impact of these reforms and is committed to ongoing evaluation, including the scale of surplus released.

The Government has not made an assessment of the number of DB scheme members belonging to schemes in surplus that are resident in Essex.

Secondary information

Type

Written question

Reference

10325

Session

2026-27

Grouped for answer

Yes

Subjects

Workplace pensions Reform Pensions Regulator

Link

View this Written question on www.parliament.uk