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Brightwell comments on the DWP’s surplus flexibilities for Defined Benefit pension schemes consultation

As the DWP’s consultation on the draft regulations for surplus flexibilities closes, Morten Nilsson, CEO, Brightwell comments: “We’ve always welcomed the Government’s proposals to make it easier for well-funded, well-run defined benefit schemes to make productive use of surplus, while maintaining appropriate protections for members.

“The low dependency funding basis provides a prudent and conservative measure of scheme liabilities, but it is important that trustees retain the flexibility to exercise judgement based on the specific circumstances of their scheme.

“The success of the regime will ultimately depend on creating a framework that is practical to operate in the real world. That means avoiding unnecessary administrative burdens around repeated notifications and approvals and enabling trustees to implement long-term surplus release plans that can flex as circumstances change.

“How surplus is used will be highly scheme specific and it’s important that the regulations and guidance recognise this and avoid setting expectations.

“It was surprising to see that schemes with a Crown Guarantee are excluded from the proposed regime as they meet the same funding and regulatory standards as other defined benefit schemes. Excluding them risks undermining confidence in the reforms and raising broader questions about the consistency of the approach. I would urge DWP to revisit this decision.”