Payment of surplus to the employer—ongoing pension schemes
Produced in partnership with Mark Ridler of Hill Dickinson

The following Pensions practice note produced in partnership with Mark Ridler of Hill Dickinson provides comprehensive and up to date legal information covering:

  • Payment of surplus to the employer—ongoing pension schemes
  • The power to make the payment and the terms of the power
  • Background to Section 251 Resolutions
  • Section 251 checklist
  • Section 37 of the Pensions Act 1995
  • Defined benefit schemes
  • Earmarked schemes
  • Defined benefit and earmarked schemes—sanctions
  • Taxation
  • Deciding whether in the circumstances it is in the best interests of members and in accordance with their duties as trustees to make the payment

Payment of surplus to the employer—ongoing pension schemes

THIS PRACTICE NOTE APPLIES ONLY TO DEFINED BENEFIT AND HYBRID OCCUPATIONAL PENSION SCHEMES.

Payments to employers from trust schemes that are defined benefit schemes or earmarked schemes are highly regulated. Trust schemes are defined as any occupational pension scheme established under a trust. Employers for these purposes are the employers of persons in the description of employment to which the scheme in question relates.

This Practice Note concerns any payments of surplus made when the scheme is not winding up. There is a separate statutory regime under section 76 of the Pensions Act 1995 (PA 1995) for the payment of surplus to the employer where a scheme is being wound up (for further information, see Practice Note: Payment of surplus to the employer—pension schemes in winding-up).

The relevant statutory provisions relating to payments of surplus from an ongoing scheme are:

  1. the section 251 of the Pensions Act 2004 (PeA 2004) (Section 251). This section determines whether a power in the scheme’s trust deed or rules is valid. It also enabled trustees to alter by resolution the circumstances in which the power is exercised and the conditions to which it is subject

  2. the PA 1995, s 37 (Section 37) and the Occupational Pension Schemes (Payments to Employer) Regulations 2006, SI 2006/802. These provisions set out certain requirements before a payment can

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