HMRC has provided further updates on the pension measures announced as part of the 2025 Budget, including changes to defined benefit (DB) surplus payments and the timing for collective money purchase schemes changes.

Whilst this year's Budget featured a number of high-profile pension reforms, the detail surrounding many of these changes has so far been lacking.

Some early details are emerging, as HMRC's latest Pension Schemes Newsletter confirmed that legislation will be introduced to enable DB pension schemes to make direct payments of surplus assets to members or other beneficiaries, where permitted by scheme rules and subject to trustee discretion.

These payments will be treated as authorised payments and will be taxed as pension income at the individual’s marginal rate of tax.

For these payments to be made, schemes must be in surplus on the same funding basis as applies to payments to employers.

The payments will also be subject to certain conditions, including the member being above the normal minimum pension age (NMPA).

HMRC confirmed that trustees must continue to act in accordance with their duties to protect the interests of scheme beneficiaries.

The changes will be legislated for in the Finance Bill 2026-27, taking effect from 6 April 2027.

EY pensions consulting lead, Paul Kitson, suggested that this update will "likely be welcome news for both pension scheme members and sponsors".

"One of the challenges of the surplus return flexibilities originally being introduced in 2027 was that it was quite difficult to deliver benefits to pension scheme members in practice," he stated.

"The change announced today introduces the possibility of lump sum payments to be made directly to members over the normal minimum pension age.

"Once implemented, this new regime could bring extra value for Trustees in negotiating surplus sharing with sponsors, and could mean higher levels of surplus are distributed between members and sponsors."

As announced at the Budget, the government will also legislate to enable unconnected, multiple employer collective money purchase schemes, more commonly referred to as collective defined contribution (CDC) to apply to HMRC to become a registered pension scheme.

The government will also take a regulation-making power to allow HMRC to legislate for collective money purchase schemes more efficiently in the future.

However, HMRC's update confirmed that while the measure will have effect on and after the date of Royal Assent to the Finance Bill 2025, the provisions relating to unconnected, multiple employer schemes will be operational only after the Department for Work and Pensions’ unconnected, multiple employer schemes legislation has taken effect.

HMRC's latest newsletter also commented on the widespread speculation seen ahead of this year's Budget, warning that reported changes to pensions could have resulted in some companies marketing schemes that allow individuals early access to their pensions to reduce their tax bill, or reduce their exposure to changes that may come at a Budget.

"We would be grateful if you could remind your members that early access to pensions is rarely in anyone’s long-term financial interests and can carry tax charges of more than half the unauthorised payment," HMRC stated.

"Members should get suitable professional advice, including from a regulated financial adviser."

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