Measure
The government has announced plans to reduce the tax charges that would currently apply if any surplus funds held by defined benefit (DB) pension schemes are paid directly to members. The reduction is expected to apply only to direct payments to members who are over minimum pension age and will require pension scheme rules and trustees to agree to the payments.
This change follows the reduction of the authorised surplus payments charge, which applies to payments from DB pension schemes made back to employers, from 35% to 25%, effective from April 2024.
Trustees of DB pension schemes and employers who have DB pension schemes which are in surplus.
The change will become effective in April 2027.
This change is expected to make it easier for employers and trustees to come to agreement over the use of DB pension surpluses by allowing benefits to be split between members and employers without incurring disproportionately large tax charges.