Sweeping changes set out in the Pension Schemes Bill 2025 will, for the first time, let trustees rewrite their own scheme rules to pay surplus money back to sponsoring employers, provided the scheme is fully funded on a forthcoming “low-dependency” test. The Government says the new statutory power, published in the Bill on 5 June, removes the need for historic section 251 resolutions and will make it easier for well-funded defined-benefit (DB) schemes to channel capital into UK businesses.
How the new power will work
Trustees may add a surplus-payment clause or relax existing restrictions—even if the deed currently forbids it.
Payments will be allowed only where actuaries certify the scheme is at least fully funded on the low-dependency basis; the exact metric will be set in regulations later this year.
Any surplus extracted before reinvestment will trigger the existing 25 per cent authorised-surplus payment charge.
The DWP has hinted the regime will not go live until 2027, giving schemes time to adapt.
The Pensions Regulator has warned that “low dependency is not no dependency”, urging boards to keep a close eye on employer covenant even when the new funding hurdle is met.
Virgin Media shadow still hangs over schemes
Running alongside the surplus reforms, ministers have promised legislation this autumn to validate decades of benefit changes jeopardised by last year’s Virgin Media v NTL Pension Trustees ruling. The judgment meant any amendment made between 1997 and 2016 to a contracted-out DB scheme is void if written actuarial confirmation under section 37 was missing. New regulations will let schemes obtain that confirmation retrospectively, clearing the log-jam for de-risking deals.
Law firms say trustees should begin auditing their rule changes now so they can “queue jump” once the fix becomes law. “If you’re eyeing a buy-in in 2026, you’ll need the paperwork ready,” said one pensions partner.
Critics warn of ‘piggy-bank pensions’
The reforms have split opinion. Business groups welcome a potential £160–£360 billion pool of surplus assets, but campaigners fear schemes could be raided before members’ benefits are fully secured. The Pension Security Alliance told The Times the plans risk turning pensions into “piggybanks” for cash-hungry sponsors.
What employers and trustees should do now
Map your funding position against the low-dependency benchmark; stress-test for market shocks.
Audit every post-1997 rule change for missing section 37 certificates and prepare an “evidence pack” for retrospective confirmation.
Model the 25 % tax cost and consider whether paying surplus beats alternative uses, such as benefit improvements or premium-free buy-outs.
Document all decisions and keep member-communication templates under review; DWP has not yet decided whether notification rules will change.
Watch for draft regulations expected in Q4 2025 that will set the funding formula, trustee-employer sign-off process, and the timetable for the Virgin Media remedy.
With Royal Assent expected early in 2026, advisers say the window to gear up systems, documentation and governance is “short but manageable”—provided schemes start the homework now.
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