As expected, the Pension Schemes Bill sets out a framework to free up refund of surplus to the employer from ongoing schemes.

Trustees will be able to give themselves a new power to refund surplus, and to remove any existing restrictions on refunds. These provisions will be in a new section 36B of the Pensions Act 1995. Schemes that are “being wound up” are excluded. Other schemes can be excluded by regulations.

This opens a wide gateway for schemes that do not have those powers at present. It will be a significant change in the balance of powers for many older pension schemes, especially schemes that date back to before 1970 when the tax regime changed.

Whether trustees can go through that gateway will be governed by the restrictions in “the other section 37”. This is the one in the Pensions Act 1995 (as opposed to the one in the Pension Schemes Act 1993 which caused the Virgin Media issue). This section 37 currently restricts refunds of surplus from ongoing schemes. New restrictions will be adopted, with the details to be set out in regulations which are required to be made (not just permitted) spelling out an actuarial certification process, with conditions about the scheme’s assets and liabilities and the basis on which they are determined. There will no longer be a statutory requirement that the trustees are satisfied the exercise of the refund power is in members’ interests. Other conditions can be imposed by regulations; prohibiting refunds from superfunds is mentioned. Regulations can also disapply or modify section 37, as well as section 76 of the 1995 Act which imposes restrictions on refunds of surplus on winding-up.

Whether trustees can go through the gateway is one thing. Whether they will want to is quite another.

The Bill does not attempt to define the fiduciary duty of trustees. In our view this is wise, and welcome. However there may still be an intention to do this in regulations.

The DWP’s press release repeats the statement that there will be increased flexibility for DB pension schemes to “safely” release surplus worth £160 billion “to support employers’ investment plans and to benefit scheme members”. We have yet to see the detail of how members’ interests are to be protected by reducing a funding reserve for the future in return for some extra benefits now. Trustees will be looking at the interests of beneficiaries overall and there may be some inter-generational issues.

As ever we must wait for the next level of detail to be revealed. That won’t be any time soon. According to the “roadmap” the DWP published alongside the Bill, consultation on surplus regulations is scheduled for Autumn 2026.