ACA calls for changes to DB surplus payment rules

The Association of Consulting Actuaries (ACA) has called for changes to proposed defined benefit (DB) pension scheme surplus payment rules amid concerns they would be difficult to use in practice.

This comes as the association welcomed HMRC proposals to allow defined benefit (DB) pension schemes to make direct authorised member surplus payments (AMSPs).

However, it called for changes to the proposed restrictions on schemes in wind-up and the requirements brought across from employer surplus payment rules.

The ACA said trustees may only know how much surplus is available later in the wind-up process, once benefits have been bought in and remaining costs are clearer.

It warned that blocking payments at this stage could push schemes towards increasing insured benefits, delaying payments to members and tax receipts for the Exchequer.

Kirsty Cotton, chair of the pensions taxation committee at the ACA, said: “As well-funded ongoing DB schemes gain the flexibility to return surplus to employers, it is only right that members should also have a workable route to receive a share of surplus directly. 

“However, trustees of schemes winding up would welcome a similar option. 

“Excluding these schemes risks cutting off that flexibility at exactly the point when trustees may have much greater certainty over what surplus is genuinely available.”