From Principles to Practicalities: Draft surplus regulations and TPR’s statement

From Principles to Practicalities: Draft surplus regulations and TPR’s statement

15 Jun 2026

Draft regulations on surplus flexibilities for defined benefit pension schemes were published by the DWP on 10 June 2026, with a consultation open until 2 September and implementation expected from April 2027.

The proposals confirm a minimum threshold for surplus release of 100% of low dependency funding and introduce a three-year forward-looking test requiring actuarial certification before surplus can be released.

Alongside the draft regulations, TPR published a statement setting out key considerations for trustees when assessing surplus release. This includes two case studies which may be important reference points for trustees.

Our latest Insight explores what these developments mean for trustees and sponsors, and how to prepare for potential surplus release.

Download our XPS Insight here

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Actions you can take

• Review the balance of powers in the scheme rules and how the new surplus legislation would apply.
• Understand the current low dependency funding position and the full range of strategic options available, including what running on for surplus could look like for both members and employers.
• Where appropriate, begin initial discussions with key stakeholders, including gaining an understanding of the employer’s motivations for surplus release. Consider establishing a surplus policy if one is not already in place.
• Respond to the consultation, either directly or via your usual XPS contact.

The surplus release process

The finer detail: Surplus flexibilities in more detail

Draft regulations:
Aim of the new framework	The draft regulations support the Government’s aim of improving flexibility of surplus use. Notably, there is no mandation of any particular use for released surplus.
The funding tests	To release surplus, the Scheme Actuary must confirm that two funding tests are met: Assets exceed liabilities assessed on the low dependency funding basis. The scheme’s assets are ‘as likely as not’ to remain above the low dependency liabilities over the following three years.
TPR’s statement:
Surplus for members	TPR understands that both employers and members may expect to benefit from surplus release. Trustees should keep in mind: Members’ reasonable expectations – for example, where members have contributed to the scheme or there is an established practice of granting discretionary benefits. Inflationary protection and standard of living – the extent to which scheme benefit increases due under the rules have kept pace with inflation. Previous changes to benefits - whether benefits provided have been reduced, capped or enhanced in the past.
Conscious decision	TPR emphasises that surplus release should be a conscious decision and trustees should be satisfied it is appropriate. Trustees should consider: An additional buffer above low dependency to protect against downside risk. The planned length of running on, taking into consideration scheme maturity. Strength of the employer covenant, future prospects and ongoing support. Contingent assets and other protections that could be negotiated. Investment strategy changes needed to reduce volatility in future funding.
Case studies	TPR’s statement contains two case studies, both relating to a £1bn scheme currently 110% funded on a buyout basis. In both case studies, TPR highlights the factors that trustees should consider in assessing and agreeing a surplus release framework. The key elements of the surplus release framework set out in the case studies are as follows:

Find out more

For further information, please get in touch with Annabel Dodd, Sarah Vanhouse or speak to your usual XPS Group contact.