Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what assessment she has made of the sufficiency of the incentives under the surplus extraction provisions in the Pension Schemes Act 2026 for sponsoring employers to share surplus funds with (a) scheme members and (b) members whose pre-1997 pension benefits do not receive annual increases.

The Pension Schemes Act 2026 provides greater flexibility for more trustees of well-funded defined benefit pension schemes to share surplus, while maintaining strong protections for members. Scheme trustees, working with sponsoring employers, will be responsible for decisions on surplus release and must act in the interests of scheme beneficiaries. They will determine how members may benefit from any release of surplus, which could include discretionary benefit increases. As part of any agreement to release surplus funds to the employer, trustees may negotiate additional benefits for members.

The Government recognises that some members have pre-1997 accrued pension rights that are not subject to statutory annual increases. The Pensions Regulator already expects trustees to consider members who would benefit from discretionary increases and to take account of any history of making such awards.

When the surplus regulations come into force, the Regulator will issue guidance outlining matters for trustees to consider when releasing surplus, including whether members may also benefit. This guidance will be consulted on before it is published.