How landmark DWP & TPR publications have shifted the trustee board agenda
On 10 June 2026, the UK retirement landscape saw a ‘double dose’ of publications designed to unlock an estimated £160 billion tied up in defined benefit (DB) pension schemes.
The Department for Work and Pensions (DWP) launched a 12-week consultation outlining draft regulations for the Pension Schemes Act 2026 (which achieved Royal Assent in April), while The Pensions Regulator (TPR) simultaneously released an interim statement to guide trustees handling immediate surplus requests from employers.
There’s lots for pension trustees and scheme sponsors to think about – and start taking action on now…
What are the key changes?
The overarching goal is to pivot DB schemes away from a default hurry to buy-out mentality toward a managed run-on strategy that can safely release capital back into the UK economy and benefit scheme savers.
How will the market be impacted?
The publication of this guidance marks a structural regime change for the pensions market (click the tabs):
Historically, corporate sponsors viewed DB pension schemes as a financial black hole – they shouldered 100% of the downside risk if funding fell but had virtually zero access to the upside if the scheme performed well. This asymmetry heavily incentivised employers to push for rapid insurance buy-outs. The new rules make running on a rational, financially viable corporate strategy.
Over the last few years, the bulk annuity market has faced capacity constraints as hundreds of well-funded schemes rushed to insurers at the same time. Allowing safe, structured run-ons will spread demand, giving insurers breathing room and potentially easing pricing pressure.
Immediately following the release, TPR issued warnings urging pension trustees to “resist undue pressure” from employers. Because 4 in 5 DB schemes are now in surplus, corporate sponsors are eager to get cash back on the balance sheet. Expect intense negotiations between corporate finance teams and trustee boards over the coming months.
The ability to offer one-off lump sums to members from the surplus rather than adjusting complex inflation-linked rules opens up clean, easy-to-administer ways to share the wealth.
What are the next steps for pension trustees?
This framework shifts DB surplus release from a theoretical future event to an active corporate conversation. TPR and the DWP have made it clear trustees cannot afford to wait until the law formally changes on 6 April 2027.
Corporate sponsors are highly motivated to access this capital. To prevent being caught off-guard or placed under ‘undue pressure’, all trustee boards should take the actions outlined below.
The immediate takeaway: trustees are the ultimate gatekeepers. While the legislation removes old technical barriers, it does not mandate a payout. The regulator’s message is simple: get your policy, your data and your legal boundaries sorted now so you can control the upcoming negotiations.
1. Governance & policy preparation
- Establish a formal surplus policy
If your trustee board doesn’t have one, you should review surplus and build a policy now. This will act as your defensive playbook. It must outline your board’s specific appetite for risk, what triggers a surplus discussion and the baseline safety buffer your scheme requires above the statutory minimums before you’ll even consider a release.
- Audit board skills for the run-on model
Historically, many pension trustees trained for a single finish line: insurance buy-out. Managing an ongoing scheme to deliberately generate and extract surplus requires a completely different mindset. Trustees must honestly evaluate whether the board has the commercial and investment expertise needed to oversee a long-term run-on strategy.
- Clean up data & address legacies
You cannot distribute a surplus safely if you don’t have immaculate data. Trustees must immediately accelerate projects to fix historic administration issues, clean up member data and finalise any outstanding Guaranteed Minimum Pension (GMP) equalisation calculations. If your data is wrong, your surplus calculations are wrong.
2. Legal & financial baseline assessments
- Execute a legal rules review
Trustees must instruct their legal advisers to review the scheme’s Trust Deed and Rules. You need to identify exactly who currently holds the power to distribute surplus (is it the trustees, the employer or a joint power?), what constraints exist and whether the scheme currently allows for discretionary benefit augmentations for members.
- Initiate conversations with the Scheme Actuary
While the statutory ‘3-year forward look’ test isn’t law yet, trustees must ask their actuary to run preliminary assessments. You need to know what your scheme’s current funding position looks like specifically on a low-dependency basis and how volatile that number is likely to be over a rolling three-year window.
- Re-evaluate the employer covenant
Because a surplus extraction drops the scheme’s funding buffer down from the gold-standard buy-out level, you become more reliant on the employer surviving over the medium-to-long term. Trustees must assess the financial health and longevity of the corporate sponsor to determine if they are strong enough to back a run-on strategy.
3. Engagement & protection
- Proactively engage the employer
Do not wait for a formal demand letter from corporate finance. Trustees should initiate early, collaborative dialogue with the sponsoring employer to understand their motivations, timelines and ideas for the surplus.
- Prepare to negotiate for members
TPR has explicitly stated trustees must remember their primary fiduciary duty is to the scheme’s beneficiaries. If an employer wants to extract surplus, trustees must prepare to negotiate a quid pro quo – such as demanding a portion of the release be used for discretionary member benefit increases (to combat historic inflation) or a contingent corporate asset as a secondary safety net.
- Document the rationale for everything
Because surplus extraction pits the financial desires of the pension scheme’s sponsor against the security expectations of members, these decisions carry a high risk of future legal challenge. Trustees must meticulously document every discussion, the professional advice taken and the exact rationale behind their risk tolerances.
What should pension scheme sponsors be doing?
Initiate early engagement:
don’t wait until April 2027. Begin constructive dialogue with your trustee board now to outline corporate motivations and align on the investment strategy required to maintain that 3-year projected buffer.
Model capital allocation:
model how a potential cash injection or a reduction in future service contributions could be utilised within the business to support growth, thereby strengthening the employer covenant backing the scheme.
The consultation closes on 2 September 2026, with the final framework slated to go live on 6 April 2027.
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