New DWP update published with September 2026 deadline set

New DWP update published with September 2026 deadline set The UK Government has set out its plan The Department for Work and Pensions has published a new update. The Government has unveiled a consultation outlining conditions for releasing 'trapped' capital from defined benefit pension schemes, in an effort to keep up with the rapidly evolving pensions landscape and unlock greater amounts of capital. The consultation, published on Wednesday by the DWP, outlined proposals to grant trustees increased flexibility to release surplus funds for the benefit of employers, scheme members and the broader UK economy, while maintaining robust funding levels. The proposals emerge as DB pension schemes find themselves in their "strongest ever financial position", with the number of schemes in surplus having quadrupled over the past five years, meaning most scheme assets now surpass the value of promised pension benefits. This has prompted the government to seek ways of freeing trapped capital in overfunded schemes in a bid to drive economic growth and encourage greater investment from employers. The consultation outlined proposals including adjusting the funding threshold, replacing the existing buyout-based test with a low-dependency funding test, reports City AM. Government proposals The government expressed confidence that "full funding on low dependency is the right threshold for surplus extraction", describing low-dependency funding as "a robust and prudent threshold". The proposal also suggested introducing a forward-looking funding test, asserting that the security of benefits within a scheme "is not only determined by the funding position at the time of the release but also whether any surplus release meaningfully impacts future scheme funding". The consultation contends that this additional test offers trustees greater reassurance that, should they opt to release surplus funds to the employer or members, it will not jeopardise the scheme's long-term financial stability. The consultation further recommended strengthening the surplus release process, including mandating an actuarial assessment of assets and liabilities, trustee consideration, professional guidance, and agreement with the sponsor on a provision. The report additionally called for improved transparency for scheme members, proposing that notifications should be issued at least three months prior to payment, while schemes should also inform the Pensions Regulator once payment has been made. The consultation closes to responses on September 2, 2026. Strong position Pensions Minister Torsten Bell said: "For the first time in a generation, DB pension schemes are in a genuinely strong financial position, with the vast majority of schemes now having a surplus. This is something well worth celebrating. "Now is the time to give trustees the option of safely translating some of those surpluses into real benefits for members and employers." Industry concerns While the industry has welcomed the government consultation following the passing of the Pension Schemes Act, claiming the government has taken "a significant step in recognising that the defined benefit landscape has changed materially", concerns remain. Industry figures have urged the government to ensure long-term member security stays a top priority and isn't overshadowed by potential reforms. Plan concerns David Brooks, head of policy at independent pensions consultancy Broadstone, said: "Long-term member security must remain the overriding consideration. Surpluses can disappear more quickly than they are created, particularly during periods of market stress. "While the direction of travel is positive, it remains the case that member participation in any surplus distribution is not automatic and will depend on trustee judgement and scheme-specific negotiations. "The effectiveness of the new regime will therefore hinge on how consistently trustees prioritise member outcomes when considering surplus release and whether emerging market practice develops towards more explicit and equitable approaches to sharing upside between employers and members."