Template

Skeleton DB surplus policy — a starting template

TPR’s first ask of DB trustees on surplus is governance, not numbers: “check whether they have a surplus policy and, if they don’t, consider putting one in place” ^TPR. This page is a skeleton of such a policy — the sections TPR’s statement expects it to cover, in the order a board would set them, with draft clause wording. It pairs with the DB surplus release readiness checklist (the actions); this is the document.

A starting template — not advice, and not scheme-specific. Every [BRACKETED] item is a decision for your trustees to make and complete on your own advice; the draft wording is illustrative, not legal, actuarial or covenant advice. The release mechanics in §8 follow the draft Occupational Pension Schemes (Payments to Employer) Regulations 2027 as consulted on — they may change in the DWP response, and there are no transitional measures ^DWP.

How to use. The section wording is regulator-prescribed and ready to keep; the [BRACKETED] items are the only parts you complete, with your scheme’s own detail and advice. Prefer the Download Word version — the rationale and source behind each section ride along as margin comments you can read, then delete.

1. Purpose and scope

This policy sets out how the Trustees of the [SCHEME NAME] (“the Scheme”) will consider, decide on and give effect to any release or application of surplus assets, in the interests of members and having regard to the sponsoring employer. It takes effect from [DATE] and applies to the [whole Scheme / named section(s)]. It will be read alongside the Scheme’s funding and investment strategy, its statement of investment principles and its covenant monitoring arrangements.

Why: TPR asks trustees to hold a surplus policy and to align the funding and investment strategy, including the long-term objective, to it ^TPR.

2. Principles

a. The Trustees remain the decision-makers on any surplus release and will exercise their fiduciary duties independently. Surplus will be considered only where the security of members’ accrued benefits is not compromised. b. The Trustees will weigh the balance between members and the employer in any sharing of surplus, and will not be placed under undue pressure to release. c. The Scheme’s stated long-term objective is [buyout / run-on / low dependency — specify]; this policy operates consistently with that objective.

Why: the Pension Schemes Act 2026 repeals the separate statutory “interests of members” test, but fiduciary duties remain, trustees stay the decision-takers, and TPR does “not expect trustees to be placed under undue pressure, such as seeking to replace members of the trustee board solely to secure agreement to a release” ^TPR.

3. Funding trigger and buffer

The Trustees will consider a release only where the Scheme’s assets exceed its liabilities measured on the low-dependency basis, and only above a buffer of [BUFFER — e.g. a funding level of [X]% of low-dependency liabilities]. The buffer is set as an integrated judgement across the investment strategy and the employer covenant, and will be reviewed at each [valuation / annual review].

Why: the draft test is two-part — assets greater than liabilities on the low dependency basis at the effective date, and the position “at least as likely as not” to persist at any given time over the following 3 years ^DWP. The buffer above that floor is the trustees’ decision, which TPR expects “to be done in an integrated way so that it comprises the investment strategy and employer covenant”; its illustrative case study releases only above a 5% buffer — a 105% low-dependency trigger, “equivalent to around 94% funded on a buyout basis” ^TPR.

4. What is held back

The Trustees will retain [the buffer defined in §3 / a specified reserve] and will consider [contingent-asset protection / other downside recourse] where the Scheme is funded above low dependency but below full buyout. No release will reduce funding below the trigger in §3.

Why: contingent-asset protection “may be particularly useful” where the scheme is above low dependency but below full buyout — recourse in a downside scenario ^TPR.

5. Covenant

The Trustees will monitor the employer covenant and the employer’s prospects on a continual basis in line with their covenant arrangements. A full covenant assessment will not be undertaken for every release discussion, but the current covenant position will inform every decision.

Why: TPR does “not expect trustees to perform a full covenant assessment as part of every surplus release discussion” but does expect covenant strength and employer prospects monitored on a continual basis ^TPR. See Assessing and monitoring employer covenant.

6. Data and benefit certainty (precondition)

No release will proceed unless the Trustees are satisfied that Scheme data and benefits are sound — including that any [GMP equalisation] and [section 37 / historic-amendment] issues have been identified and, where material, addressed.

Why: TPR’s preparation list is explicit that trustees should review data and administration “including whether amendments have been applied regarding guaranteed minimum pension (GMP) equalisation and/or remediation for past alterations”, and prioritise that work where material issues surface ^TPR. See GMP equalisation and Virgin Media v NTL Trustees — section 37 and historic rule amendments.

7. Sharing between members and the employer

Where surplus is shared, the split between members and the employer will be decided deliberately as [SPLIT — e.g. member share [X]% / employer share [Y]%], having regard to: historic member contributions; any past benefit reductions or caps; the impact of inflation on benefits; reasonable member expectations; and the employer’s historical support of the Scheme.

Why: TPR expects trustees to “negotiate the level of surplus release and consider the balance between members and the employer in sharing the surplus”, weighing those listed factors; its paired case studies pair a 50/50 split with the riskier low-dependency threshold and a 20/80 split with release only above full buyout funding ^TPR.

8. Release process (as drafted)

Any release will follow the statutory process in force at the time. Under the regulations as drafted, the Trustees will: obtain an actuarial assessment on the low-dependency basis at a chosen effective date; agree a provisional amount with the employer (the Trustees are never required to pay); issue a written statement to members at least 3 months before release; obtain an actuarial certificate and pay within 5 working days of it; and notify TPR within one week of payment.

Why: these are the draft regulations’ mechanics, in order ^DWP. The detail and the [SCHEME-SPECIFIC] steps sit in the DB surplus release readiness checklist.

9. Documentation and review

The Trustees will document the discussions and considerations behind any surplus decision, and the rationale, to demonstrate the decision-making process. This policy will be reviewed at least [every valuation / every [N] years] and on any material change to funding, covenant or the legal framework.

Why: TPR closes its list with documentation — trustees “should document discussions and considerations around surplus release to demonstrate the decision-making process and rationale, in case of any future challenge by the sponsoring employer or scheme members” ^TPR.

What to complete

Every [BRACKETED] field is yours: the scheme name and effective date (§1), the long-term objective (§2), the trigger and buffer (§3), the reserve and any contingent assets (§4), the data preconditions (§6), the agreed split (§7), and the review cadence (§9). Sections 1–7 and 9 rest on TPR’s own preparation expectations and are actionable now; §8 is the process to plan around, flagged as draft.

Still to come

The draft regulations are not final. Track, before treating §8 as settled: the DWP consultation response (consultation closes 2 September 2026); TPR’s surplus-release guidance; the Finance Bill 2026-27 tax treatment; FRC guidance for actuaries on the 3-year forward-looking assessment; and commencement — April 2027, with no transitional measures ^DWPTPR.

Related

DB surplus release readiness checklist · Surplus Flexibilities — the draft Payments to Employer Regulations 2027 · Run-on as a strategic endgame — risks, rewards and surplus policy · The Pension Schemes Act 2026 and DB surplus / endgame policy · Assessing and monitoring employer covenant · GMP equalisation · Virgin Media v NTL Trustees — section 37 and historic rule amendments · Key dates — the UK pensions reform timeline