Government plans to allow employers to extract cash from defined benefit (DB) pension schemes could put millions of people's pensions at risk and should be reconsidered, a new campaign group has warned.

In response to the consultation on options for DB schemes, the government has confirmed it will change the rules surrounding DB surpluses in order to make it easier to access these funds.

This would include a statutory resolution power for scheme trustees to modify their scheme rules in order to access the scheme surplus.

However, the Pension Security Alliance (PSA) – a group of businesses, campaigners and pensions professionals – said that the proposals to allow surplus money to be extracted from pension schemes were "not in the interests" of more than 10 million members and beneficiaries of private-sector DB pensions.

The PSA also argued that the affected people "must be consulted" about any change that could threaten their pension, stating that "ministers and trustees must not ignore millions of people who have earned their pension and don't want it put at risk."

The campaign group also highlighted a 2024 Department for Work and Pensions (DWP) consultation document that stated that "any surplus extraction will reduce security for members".

"Allowing money to be removed from pension schemes before members' benefits have been secured runs the risk of those schemes running short of money in the future if financial conditions change," the campaign group argued.

The PSA is made up of Silver Voices, the Older People's Advocacy Alliance (OPAAL),
John Ralfe, the Pension Insurance Corporation (PIC), and Just Group.

In a statement announcing its launch, the PSA said: "Pension schemes exist to pay the pensions of workers who have earned their retirement income.

"They're not piggybanks for others to dip into. Millions of people rely on these schemes for their retirement income. It's not right for ministers to put those pensions at risk like this.

"The government's own proposal document admits that extracting cash from pension schemes increases the risk that schemes won't be able to pay pensions in full. Instead of pushing ahead with these risky plans, we urge ministers to think again and listen to the millions of people who want them to put the security of their pensions first.

The government plans are set out in a DWP paper that said ministers will "consult" on the detail of surplus extraction plans. PSA pointed out that the same document revealed that the government drew up its policy having heard from only 5 of the millions of people who have DB pensions.

Consequently, the PSA has urged people with DB pensions to write to their MP and pension scheme trustees to raise concerns about the surplus plans.

Despite their concerns, other industry figures have welcomed the government's "bolder than expected" plans to lift restrictions on how pension scheme surpluses were used.

The Pensions and Lifetime Savings Association (PLSA) said it "welcomed" the measures, suggesting that surplus release by schemes could provide an opportunity to improve member benefits, boost defined contribution (DC) pension contributions, and support new types of investment with appropriate saver protections.

In addition to this, Society of Pension Professionals (SPP) DB committee chair, Jon Forsyth, described the changes as "an important development" for DB scheme strategy, while Isio director, Iain McLellan, said that the response provided "more detail" on how the government's thinking had evolved and the measures it intended to take forward.

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