Surpluses in defined benefit schemes may be a distant memory for most, but trustees (and employers) must act now if the employer is going to retain the opportunity to access surplus monies from an ongoing scheme after April 2016. Scheme provisions enabling repayment of surplus to an employer during the winding up of a pension scheme are not affected. 

Legislation introduced in 2005 (and revised in 2012) gives trustees until 5 April 2016 to pass a resolution enabling the employer to receive surplus from an ongoing scheme. This applies only to schemes which already have provision for the trustees to pay surplus to the employer – there is no scope for the resolution to introduce a new power where one does not already exist. Where trustees wish to preserve the existing provision, scheme members must be given at least three months' notice of any intended resolution meaning that trustees need to act by the end of this year. If a resolution is not passed before 6 April 2016 then there is unlikely to be another opportunity to do so and any surplus will be locked in the scheme until it is wound up.     

The exact wording of the resolution will depend on current scheme provisions setting out the circumstances in which an employer can receive surplus. Some trustees may already have passed surplus resolutions between 2005 and 2012 (when the provisions were revised). They should be reviewing those resolutions and considering whether they are still appropriate as a second resolution can still be made before 6 April 2016 if necessary.

The power to make the resolution lies entirely with the trustees but employers should consider drawing it to their attention and encouraging them to pass an appropriate resolution. Trustees must consider the interests of the scheme beneficiaries as a whole when deciding whether to pass a resolution (and if so in exactly what form). However, it would not be unreasonable for trustees in most cases to come to the view that an employer which in the future could no longer access any scheme surplus would be reluctant to make contributions other than at a minimum level and that the interests of the scheme as a whole rely on a committed employer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.