The Pensions Regulator (TPR) has warned trustees not to come under undue pressure from sponsoring employers over defined benefit (DB) surplus release decisions, as it issued new guidance on the forthcoming surplus flexibilities.

In a statement published today, TPR set out its early views on how trustees should approach surplus release discussions ahead of the introduction of new legislation under the Pension Schemes Act 2026.

The regulator stressed that trustees will remain responsible for deciding whether any surplus release is appropriate and said their independence "is unaffected" by the new flexibilities.

TPR said it had been "clear" that it does not expect trustees to be placed under undue pressure, including attempts to replace members of a trustee board solely to secure agreement to a surplus release.

"Over this whole process, it will be for trustees to decide whether to use the new flexibilities to release surplus," the regulator stated.

The statement comes a day after the Department for Work and Pensions (DWP) launched its consultation on new surplus flexibilities, which are intended to make it easier for well-funded DB schemes to release surplus assets to employers and members.

According to TPR, around 60 per cent of DB schemes are now in surplus on a buyout basis, while around 80 per cent are in surplus on a low dependency basis.

The Pension Schemes Act 2026 introduced a statutory override that will allow trustees to distribute surplus even where scheme rules do not expressly permit this.

The government is currently consulting on regulations that will set out the detailed framework, with the changes expected to come into force in April 2027.

However, TPR said trustees and employers may already be considering how the new flexibilities could be used and encouraged schemes to begin preparations.

The regulator recommended that trustees review whether they have a surplus policy in place, ensure funding and investment strategies align with that policy, assess whether they have the expertise required to manage a scheme in run-on, and begin engaging with employers to understand their motivations for seeking surplus release.

Trustees were also urged to negotiate the level of any surplus release and consider the balance between members and employers in sharing any surplus generated by the scheme.

The statement highlighted a range of factors trustees should consider before agreeing to any surplus extraction, including the scheme's funding level, the planned duration of run-on, the strength of the employer covenant, the implications for investment strategy, and whether members should also benefit from any surplus distribution.

TPR noted that members may have a reasonable expectation of sharing in surplus in some circumstances, particularly where discretionary benefits have historically been granted.

It also pointed to the government's plans to allow one-off direct payments to members through separate tax legislation.

The regulator concluded that it will consult on more detailed guidance later this year once the DWP has responded to the consultation on the supporting regulations.

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