Defined benefit pension schemes

In line with the government's May 2025 response to the "Options for DB schemes" consultation, sections 9 and 10 of the Pension Schemes Act 2026 will make changes intended to make it easier for the trustees of an ongoing DB scheme to modify scheme rules to allow them to share surplus with the employer and, as part of this process, to negotiate with the employer to get additional benefits from surplus for scheme members.

For example, where the scheme rules do not contain a power to make a surplus payment to an employer, the Act will change the law to allow trustees to pass a resolution to amend the rules to introduce such a power. Where there is a power, the Act will change the law to allow trustees to pass a resolution to relax or remove restrictions. The requirement for trustees to previously have passed a resolution under section 251 of the Pensions Act 2004 will be removed.

The statutory conditions for payment of surplus to an employer (set out in section 37 of the Pensions Act 1995) will also be amended. In particular, the government is minded to replace the requirement that a scheme be more than 100% funded on the buy-out basis with a requirement that it be more than 100% funded on a low dependency basis. Further detail of the required funding level will be set out in draft regulations, on which the government will consult.

The 2025 UK Budget paper says that the government will enable "well-funded DB pension schemes to pay surplus funds directly to scheme members over the normal minimum pension age, where scheme rules and trustees permit it, from April 2027". More detail is needed, including on which schemes this will apply to (ongoing schemes, schemes in wind-up, or both). This HMRC newsletter confirms that the Finance Bill 2026-27 will include provisions to allow, from 6 April 2027, "direct payments of surplus assets to members or other beneficiaries " from schemes in surplus on the same funding basis as applies to payments to an employer "where permitted by scheme rules and subject to trustee discretion". These (one-off?) payments will be treated as authorised payments and taxed as pension income at the individual’s marginal rate of tax.

Why this is important

Release of surplus from an ongoing scheme has the potential to bring economic benefits to employers and to scheme members. However, it also brings some risk.

In all contexts, including when deciding whether to use the new powers to amend the scheme rules, trustees will need to act in accordance with their legal duties. To support trustees in the exercise of their duties, the Pensions Regulator will publish surplus extraction guidance.

Current position and projected timings

The Pension Schemes Act received Royal Assent on 29 April 2026, but sections 9 and 10 will only take effect when brought into force by regulations. 

The pensions roadmap released in summer 2025 suggests that the government hopes:

• To consult on draft regulations to provide additional detail in 2026.
• That those regulations will be laid in 2027.
• That the regulations, sections 9 and 10 and new Pensions Regulator guidance on release of surplus will come into force by the end of 2027.

In its 2026 annual funding statement, the Pensions Regulator confirms that it hopes to consult on that guidance later this year.

The annual funding statement also says that, in the meantime, the Pensions Regulator will publish some guidance on the release of surplus in May 2026 and that schemes should consider the new models and options in defined benefit pensions schemes guidance that it published in June 2025. - This includes guidance on the steps that trustees and employers can take to prepare for the changes to be introduced by sections 9 and 10.

Sections 9 and 10 were not heavily amended as the Bill moved through Parliament. In September 2025, the following changes were approved by the Public Bill Committee and added to the Bill.

• Changes to confirm that it will not be possible to use the new trustee powers in order to introduce a power to pay surplus to an employer on winding-up, and to make it clear that trustees must ignore any power to pay surplus to an employer on winding-up when considering the exercise of the new powers.
• The introduction of a power to make regulations to confirm whether and how the new trustee powers will apply to certain schemes (for example, how they will apply to sectionalised schemes).

Two amendments to this part of the Bill that could have introduced greater certainty on pensions increases for members with pre-April 1997 pension rights were not approved by the Public Bill Committee and so did not make it into the Bill. The pensions minister did, however, say the following about discretionary increases: "My view - and the guidance to be released by the TPR will make this very clear - is as follows…[Even when the scheme rules say that the employers must agree [to discretionary increases], they will have a strong incentive to agree with the trustees if they are asking the trustees to release [surplus]. That is why I say that the process of surplus release will change the dynamic of those discussions, which I recognise are currently not proceeding in some cases because employers are saying a blanket no to discretionary increases."

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In line with an announcement made by the Department for Work and Pensions in early 2025, section 123 of the Pension Schemes Act 2026 will amend the Pensions Act 2004 to give the Pension Protection Fund (PPF) more flexibility in setting levies.

For example, the Act will change the law to make it easier for the PPF to set a reduced levy. It will set a new restriction on the amount of levy that can be charged. And it will change the law to say that the PPF 'may' impose a levy on a particular category or categories of eligible scheme or on all eligible schemes, rather than that it 'must' impose a levy on all eligible schemes.

Why this is important

The PPF has a strong reserve. However, the legislation governing the PPF levy is currently written in a way that would prevent the PPF from restarting the levy if it were to reduce it to zero, and prevent it from materially increasing the levy if it were to reduce it to a much lower level. Giving the PPF more flexibility would allow it to impose a reduced or zero levy on some or all schemes when appropriate while retaining the ability to raise a higher levy if needed.

Current position and projected timings

The Pension Schemes Act received Royal Assent on 29 April 2026. Section 123 will come into force on a date to be set by regulations.

The roadmap released alongside the Bill in 2025 said that any "substantial changes the PPF Board wish to make to the levy, will come into force the financial year that begins after Royal Assent (indicatively here, April 2027)."

In November 2025, the PPF launched a consultation on its plans for the 2026/27 PPF levy and gave an update on the approach it intends to take. In February 2026, the PPF confirmed that it will set a zero levy for 2026/27 for conventional DB schemes.

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Section 124 of the Pension Schemes Act makes the legislative changes needed to support people being able to see on pensions dashboards information about any Pension Protection Fund (PPF) or Financial Assistance Scheme (FAS) compensation and financial assistance to be paid to them.

Why this is important

Pensions dashboards are intended to provide people with a complete picture of what they might have when they retire and where it might be paid from. This change will ensure that the information that PPF and FAS members see on pensions dashboards includes PPF and FAS information.

Current position and projected timings

The Pension Schemes Act received Royal Assent on 29 April 2026. 

Section 124 took effect on the date of Royal Assent.

In a news item published on 29 April 2026, the PPF confirmed that " further regulations are needed before we’ll be able to connect with the dashboards."

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The UK Budget 2025 included an announcement that, from 1 January 2027 and where the original scheme provided for it, the government will introduce annual CPI-linked increases (capped at 2.5%) on pre-6 April 1997 pension of members of the Pension Protection Fund (PPF) and Financial Assistance Scheme (FAS). 

Sections 109 to 111 of the Pension Schemes Act provide the statutory framework for these increases. They were added to the Bill in December 2025 and some changes were made to them before the Act received Royal Assent.

Why this is important

Where they apply these increases will help to protect members covered by the FAS and the PPF from the impact of inflation.

The trustees of schemes in a PPF assessment period, preparing for a PPF+ buy out, or who have completed a PPF+ buy out should seek legal advice on what is changing and how this might affect them.

Current position and projected timings

The Pension Schemes Act received Royal Assent on 29 April 2026, but sections 109 to 111 will only take effect when brought into force by regulations. 

On 26 November 2025 the PPF published this statement in which it said that, if the Pension Schemes Bill " becomes law [in 2026] as expected, the first opportunity to begin applying any changes to pre-97 indexation would…be January 2027. The final shape of any legislative change, as well as when the Bill becomes law, will influence the timescales for implementation."

On 9 January 2026, the PPF published answers to the questions it has been asked most frequently by members and other stakeholders and confirmed that it planned to review and update these as appropriate.

On 29 April 2026, the PPF confirmed that it intends "to start writing out to members impacted by this change in the summer."

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In September 2025, the Public Bill Committee approved the addition to the Pension Schemes Bill of new provisions intended to help to address issues arising from the Court of Appeal's decision in Virgin Media Ltd v NTL Pension Trustees II Limited & Ors. These provisions were amended at House of Commons Report stage, in December 2025. A further amendment was proposed at House of Lords Committee stage (early 2026), but withdrawn.

Why this is important

These provisions are the ones that the DWP confirmed in June 2025 it would introduce. They are in Chapter 1 of Part 4 of the Pension Schemes Act 2026, they came into force on 29 April 2026 (the date the Act received Royal Assent), and they could provide a way forward for schemes where amendments were made to "section 9(2B) rights" in the past and a "section 37" actuarial confirmation cannot now be evidenced.

Where a scheme was wound up before the new sections came into force, where the Pension Protection Fund assumed responsibility for a scheme before the new sections came into force, or where scheme members are now members of the Financial Assistance Scheme, the sections include a deeming provision: any "potentially remediable alteration" will be treated as having met the actuarial confirmation requirement before it was made and so as always having been valid.

In other cases, trustees may make a written request to the current scheme actuary in relation to "potentially remediable alterations". The scheme actuary will then consider whether it is reasonable to conclude that, on the assumption that it was validly made, the alteration would not have prevented the scheme from continuing to satisfy the "statutory standard" (broadly, the reference scheme test). If the answer to this question is yes and the scheme actuary gives a written confirmation, then the amendment will be treated as having been valid from the point at which it was made. 

An amendment/alteration will not be a "potentially remediable alteration" if the trustees have taken "positive action" (as defined in the Act) in relation to it, or have been a party to legal proceedings (in the circumstances set out in the Act) in relation to it.

The sections in the Act also give the government power to make regulations to take further categories of amendment out of scope.

Current position and projected timings

On 23 January 2026 the Financial Reporting Council issued guidance to help scheme actuaries when considering requests for a written confirmation. The related press release included a statement from the Pensions Regulator that it would issue separate guidance for trustees in spring 2026, and initial Pensions Regulator guidance was issued on 26 March 2026.

A number of changes were made to the Virgin Media-related provisions at House of Commons Report stage in December 2025. These changes affected:

• The date these sections would take effect. This changed from two months after Royal Assent to the date the Act received Royal Assent. 
• When trustees or managers will be said to have taken "positive action" in relation to an amendment, with the result that it will not be a "potentially remediable alteration".
• When trustees or managers will be said to be or have been party to legal proceedings in relation to an amendment, with the result that the amendment will not be a "potentially remediable alteration". ("Court in the UK" is not intended to catch proceedings before a tribunal or a complaint to an ombudsman.)
• Requests for actuarial confirmation. The wording now says that, when a scheme actuary considers a trustee request for an actuarial confirmation, the actuary should start by considering the information available to them and whether it is sufficient to allow them to form an opinion, before taking any professional approach (including making assumptions or relying on presumptions) open to them in the circumstances, and not the other way around. It also confirms that, in a public service pension scheme, the "responsible authority" (rather than trustees or managers) would ask the scheme actuary for an actuarial confirmation.
• The deeming provision for "potentially remediable alterations" made to a scheme which was wound up or for which the PPF assumed responsibility before the Act received Royal Assent. This will also apply to "potentially remediable alterations" made to a part of a scheme (for example, a section of a segregated scheme) where that part was wound up/the PPF assumed responsibility for that part before the Act received Royal Assent.
• Some minor and technical changes.

A further amendment was proposed at House of Lords Committee stage (early 2026), but withdrawn. 

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A new provision (now section 126 of the Pension Schemes Act 2026) was added to the Bill in December 2025. Section 126 abolishes the administration levy and provides that, going forwards, the operating and administration costs of the Pension Protection Fund (PPF) and Fraud Compensation Fund (FCF) should be met out of those funds. It also confirms that, as has been the case in practice, no administration levy is payable in respect of the financial years starting 1 April 2023 and 1 April 2024.

Why is this important

The administration levy met the administration costs of the PPF and FCF. Removing the levy and providing for those costs to be met directly out of the PPF and FCF saves money for schemes.

Current position and projected timings

Section 126 is treated as having come into force 1 April 2026.

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