Moving forward with run-on

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The government has now set out its plans to lift restrictions on how defined benefit (DB) scheme surpluses are used – pledging to introduce a statutory override and base rules for surplus extraction around low-dependency targets.

In its response to its Options for Defined Benefit Schemes consultation on 29 May the government said it would introduce a statutory resolution power for trustees of schemes to modify their scheme rules.

The government said it was also "minded" to amend the threshold at which trustees were entitled to share surplus with the sponsoring employer from the current buyout threshold to a threshold set at full funding on the low dependency funding basis.

Measures to introduce these plans – provisions the government said would provide increased flexibility for defined benefit (DB) pension schemes to safely release surplus worth collectively £160bn – were introduced in the Pension Schemes Bill, laid before parliament on 5 June. The pensions minister said the regulatory regime for the new surplus flexibilities would be finalised by 2027.

The Department for Work and Pensions (DWP) will now set out draft regulations to facilitate the changes to thresholds and work with The Pensions Regulator to develop guidance with respect to DB surplus extraction.

Easing restrictions on how scheme surpluses are used could allow even more schemes to run-on and invest their assets for longer rather than immediately move to insurance-based options such as buy-in or buyout.

Professional Pensions’ latest webinar will take a look at the DWP’s proposals and assess how they could help more schemes adopt a run-on strategy.

It will take a deep dive into how scheme investment strategies for run-on – looking at how schemes should adapt strategies for run-on; the governance implications of such a move; and the sort of assets that could form part of such a strategy.