Pensions Minister, Torsten Bell, has emphasised that it is trustees, rather than employers, who will be "in the driving seat" when it comes to decisions about defined benefit (DB) surplus release, although work is underway to ensure surplus use is properly monitored.

The Work and Pensions Committee (WPC) previously held a session to hear evidence on the impact of non-inflation indexation, particularly affecting some with pre-1997 pension rights, from leading figures from affected retirees’ campaign groups.

During the session, WPC was told about specific concerns around the Pensions Schemes Bill, with the BP Pensioner Group warning that "recalcitrant" employers may simply use a veto power to completely block or minimise surplus sharing and frustrate the government’s good intentions.

In an update to the WPC, Bell acknowledged that situations may arise where the trustees and the employer do not agree on how surplus should be distributed between the interested parties, with some stakeholders suggesting a role for an arbiter. 

"However, we think it is important to be clear about who is in the driving seat when it
comes to decisions about surplus release," he stated, emphasising that decisions on the release of surplus will remain with trustees, and employers will not have direct access to surplus funds.

"We will continue to monitor how trustees are able to use the surplus powers to benefit members and employers and whether there is any need for further changes," he stated.

Bell also stressed that the Department for Work and Pensions has been working "closely" with The Pensions Regulator (TPR) throughout the development of this policy, with further guidance, building on the updates already shared by TPR, expected by the end of 2027, following the passage of the Pension Schemes Bill.

This will support trustees by outlining key considerations when releasing surplus and providing illustrative examples of how members can benefit from surplus sharing. 

Whilst Bell was not drawn in on the suggestion of including arbiters, he confirmed that there is "strong" ongoing monitoring and evaluation plans proposed for this policy, with data from TPR and HMRC set to help show the use and scale of surplus policy.

He suggested that TPR's annual survey of DB schemes also offers opportunities to explore consideration and use of surplus release.

In addition to this, he confirmed that further evaluation plans are being considered, including qualitative research with employers, schemes, and members to understand how surplus is being shared.

Whilst Bell was not able to commit to the use of an arbiter, he confirmed that the government is continuing to consider the tax regime for surplus release, as previously set out in its response to the options for DB schemes consultation.

In his letter to the committee, however, Bell again emphasised that trustees are the key factor, and will continue to be responsible for negotiating with their sponsoring employers as to how members should benefit from surplus release and have a suite of options to consider, such as benefit augmentation. 

"We remain mindful that the purpose of a pension scheme is, and should continue to be, the provision of retirement income," he stated.

Bell also confirmed that the government is still on track to consult on the important issues of governance and trusteeship before the end of the year, building on recent work it has been undertaking with TPR. 

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