Pensions minister Torsten Bell. Photo: © House of Commons/Roger Harris (CC BY 3.0)
Trustees and employers will soon be able to safely release part of scheme surpluses in a bid to boost investment and benefit scheme members, pensions minister Torsten Bell says.
In a statement released today (21 May), the Department for Work and Pensions said the majority of defined benefit (DB) schemes were now running at a surplus – with funding levels now at a record high, with three in four now in surplus and deficit payments down by over £10bn a year.
It said that, as part of the forthcoming Pension Schemes Bill, trustees and employers will soon be able to safely release part of this surplus – a move it said would "unlock" investments and benefit savers as part of the government's Plan for Change.
Bell said: "Fast falling deficit payments offer employers a cashflow boost of over £10bn a year, that can support higher wages and investment.
"And growing scheme surpluses can also be used productively. Currently some trustees are held back from sharing the benefits of a surplus, but our plans will allow all schemes to safely do so, delivering greater investment across firms and benefits for savers."
The DWP said that, in 2019, just 600 DB schemes were financed sufficiently – a number it said had tripled to over 1,800 by 2024.
It said because of this robust financial position, the additional payments businesses have had to pay to plug pension deficits has fallen from £16bn in 2010 to under £5bn in 2024 – a reduction the DWP said was delivering an immediate cashflow benefit to firms and should support higher levels of investment and wages.
The DWP added that the funding position of schemes in deficit has improved significantly, from a collective deficit of £500bn in 2019 to a deficit of just £140bn in 2024. Schemes running at a surplus have seen their collective surplus now rise to more than £160bn.
It said that, as things currently stand, many schemes cannot access their surplus but noted the forthcoming Pension Schemes Bill will allow trustees and the sponsoring employers to safely release some surplus to invest back into their businesses and unlock more money for pension scheme members.
It said the upcoming changes will focus on member protection, and trustees will continue to be required to fulfil their duties towards scheme beneficiaries.
The DWP's comments come after prime minister Keir Starmer and chancellor Rachel Reeves confirmed government plans to lift restrictions on defined benefit (DB) scheme surpluses in January.
The exact details of the surplus policy will be set out in the government's response to the Options for Defined Benefit Schemes consultation, which the DWP said is expected to be published in the "coming weeks".
