DB pension surplus release gets its detailed rules at last. The DWP published draft regulations on 10 June 2026 and the consultation closes on 2 September. Trustees would need a scheme fully funded on a low dependency basis. An actuary would have to certify it stays there for three years. The rules should take effect on 6 April 2027.
What has the DWP proposed?
The Occupational Pension Schemes (Payments to Employer) Regulations 2027. They sit beneath the Pension Schemes Act 2026. They set the conditions for paying surplus out of an ongoing scheme under section 37 of the Pensions Act 1995.
The Act did the hard part. It gives trustees a statutory power to amend scheme rules and allow a payment to an employer. That works even where the rules currently forbid it. Schemes in winding up are outside the new provisions.
The backdrop is unusual. The Pensions Regulator put around 80% of DB schemes in surplus as at 31 December 2025. Together they hold roughly £160 billion on a low dependency basis. Most of that sits trapped.
Pensions Minister Torsten Bell launched the consultation at the PMI annual conference. He said the government was moving at pace on the 2026 Act.
What is the low dependency funding test?
The threshold that replaces buyout.
Until now a scheme had to reach buyout level before anyone could take surplus out. That is a high bar and it kept most schemes out. The draft regulations set the minimum at 100% of low dependency funding instead.
The government and the Regulator have deliberately not set a higher hurdle. They leave trustees to decide what buffer above low dependency is appropriate. That is a discretion, not the absence of a test. It is where trustee and employer talks will happen.
The DWP also suggests trustees may want to use surplus to improve member benefits, not only to pay the employer.
How does the three-year test work?
Through the Scheme Actuary. Before any payment, the actuary must certify one thing. The scheme must be as likely as not to stay at least fully funded on the low dependency basis for three years.
That is a forward-looking judgment on a fifty per cent probability standard. It will turn on covenant, investment strategy and how much buffer sits above the minimum.
Two further consents apply. The trustees must agree, and so must the employer. Trustees must take actuarial advice first. They must also consult the employer on the amount and the payment date before fixing a provisional figure.
Corporate and pensions teams advising sponsoring employers have a September deadline to respond and an April 2027 regime to prepare for. The low dependency test and the three-year forward-looking certification are the two conditions that decide whether a scheme can release anything at all.
What must trustees tell members?
Members get at least three months’ notice before the proposed payment date. That mirrors the existing rule.
One element is new. Where trustees have decided to award benefit improvements, the notification must say so. That puts the member share of any surplus decision on the record alongside the employer share.
The draft regulations also carry specific provisions for multi-employer and sectionalised schemes, where sections hold separate assets.
When do the DB pension surplus rules start?
6 April 2027 is the expected date. The consultation closes on 2 September 2026 to allow for it.
Two other pieces still need to land. The Pensions Regulator has issued an interim statement with early principles and two case studies. It should consult on fuller guidance before April 2027.
The tax side runs separately. The government plans to use the Finance Bill 2026-27 to permit authorised member surplus payments. That means lump sums to members rather than pension only. HMRC is consulting on that in parallel. The regulations formalise a deferred version for members under normal minimum pension age.
The commercial question sits behind all of it. WTW’s 2026 endgame survey found half of schemes above £1 billion now expect to run on rather than buy out. Whether that holds depends on whether release proves workable in practice rather than only in principle.
The Legal Brief covered the earlier stage of pensions reform in its roundup on the pensions consultation and HMRC adviser registration. Its report on the draft Finance Bill 2026-27 covers the tax measures travelling alongside these regulations.
The DWP announcement is on GOV.UK. LCP has published a technical summary in New DB surplus flexibilities. Pensions Age reported the launch from the PMI conference.