Non-contributory scheme definition

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Defined benefit (DB) pension schemes—who owns the surplus?

FORTHCOMING DEVELOPMENT: On 22 November 2023 the DWP published its response to the call for evidence on ‘Options for defined benefit (DB) pension schemes’. The purpose of the call for evidence was to investigate how DB schemes could increase investment and build surpluses without affecting the security of the benefit available or undermining fiduciary duties of trustees. The call for evidence also examined the potential for a consolidator for public sector DB schemes.The response concluded that there was a lack of consensus in the exact method to be used in pursuing the stated aims of the call for evidence. It was also clear from the responses that there remains a lack of trust from the industry around the extraction of surpluses from schemes and consolidation of pension schemes in the public sector, although there was some support for consolidation of smaller schemes in the public sector.The DWP has therefore decided to consult in winter 2023/24 on plans to introduce measures to make surplus extraction easier and to establish a public...

Defined benefit (DB) pension schemes—who owns the surplus?

Defined benefit (DB) pension schemes—who owns the surplus? FORTHCOMING DEVELOPMENT: While hosting a roundtable meeting with leaders of the UK’s biggest businesses in the City of London on 28 January 2025, Prime Minister Keir Starmer and Chancellor Rachel Reeves outlined plans to lift restrictions on defined benefit (DB) pension funds with well-funded surpluses in order to free up capital for investment in UK businesses as part of the Labour government's wider application to fuel economic growth. The government’s thinking is that where trustees agree to share a portion of scheme surplus with the employer, it may choose to invest these funds in their core business and/or provide additional benefits to scheme members. The changes aim to unlock an estimated £160 billion currently held in surplus by approximately 75% of schemes. Legislative changes are proposed to allow all DB schemes to modify their rules for surplus extraction, subject to trustee-employer agreement. However, the government emphasises that these changes will be implemented with appropriate safeguards to protect member benefits. These...