The security of members’ benefits and independent trustee decision making must remain the priorities in defined benefit (DB) pension scheme surplus flexibility, Independent Governance Group (IGG) has argued.

The Department for Work and Pensions (DWP) launched a consultation in June on regulations to implement DB surplus flexibilities under the Pension Schemes Act 2026, allowing well-funded schemes to release surplus funds to sponsoring employers.

Responding to the consultation, IGG supported giving trustees’ greater flexibility over how surplus can be used, but said any release should reflect the scheme’s circumstances and long-term resilience.

It also backed the low dependency funding test as a minimum requirement for surplus release, while stressing that it should not serve as an automatic trigger.

IGG's research echoed this view, with over two-thirds (67 per cent) of DB corporate decision-makers favouring a buffer above the legal minimum before surplus is used or distributed.

The submission also called for safeguards to protect trustees from being replaced if they disagree with a sponsor’s approach to surplus.

IGG trustee director and head of policy and external affairs, Louise Davey, said that improved DB funding levels, and the increasing opportunities for schemes around extracting surplus, “brings the potential for competing priorities, and more complex decision-making”.

She continued: “Surplus should not simply be viewed as a windfall. It is the product of a funding and investment strategy that needs to remain resilient over the long-term. It can disappear if conditions change.

“The security of members’ benefits must remain the starting point. Low dependency provides a sensible minimum threshold but meeting it shouldn’t automatically mean surplus is available to use.”

Davey added: “Beyond that minimum, there should be no default way that surplus should be used or which party should benefit. Every scheme is different, and trustees need the freedom to weigh the circumstances of their scheme and reach the right decision. That is why their independence is so important.

“Regulations and guidance should support independent, scheme-specific judgement, rather than favouring a particular outcome, and we urge the Government to consider safeguards to ensure this.”

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