Consultation on DB surplus regulations
The government has published a consultation on draft regulations setting out new conditions for payment of DB scheme surpluses to employers, following the changes made in the Pension Schemes Act 2026 to make surplus release easier. The consultation closes on September 2, 2026, and the intention is that the regulations will come into force in April 2027. Key points to note are:
- Threshold for payment: as expected, the government is proposing that the threshold for surplus payment should be set at full funding on a low dependency basis (currently the threshold is full funding on a buy-out basis). A new forward-looking element to the funding test is being proposed: the actuary must confirm that the scheme is not only above the low dependency threshold at the time of release, but that at any point over the next three years the scheme is ‘at least as likely as not’ to be fully funded on that basis.
- The process for surplus release would include: an initial actuarial assessment of the scheme’s funding level; agreeing a provisional amount for release before notifying members (who must be given at least three months’ notice); and payment being made within five working days of the date of the final actuarial certificate (currently, the actuarial certificate may set a maximum payment and remain valid for up to 15 months). After a payment is made, trustees will be required to notify the Pensions Regulator (TPR) of the payment within one week, providing more details than under the current regime.
- Direct payment to members: HMRC will consult separately on changes announced in the Autumn Budget to allow direct payment of surplus to members as authorised payments. Legislative changes on this will be included in the Finance Bill 2026-27, to come into force in April 2027.
TPR has published its ‘early views’ alongside the regulations, indicating how trustees should approach surplus release. In preparing for surplus release discussions TPR expects trustees to: consider putting a surplus policy in place, which the funding and investment strategy should align with; consider whether the trustee board has the correct expertise; maintain up-to-date information regarding the level of funding on a low dependency basis and the current investment strategy; and review the quality of scheme data and administration.
TPR also sets out some factors that trustees should take into account when considering release, including: whether they should maintain a funding buffer above the low dependency level; continual monitoring of the strength of the employer covenant; whether contingent asset support would be appropriate (TPR suggests this may be particularly useful where the scheme is funded above a low dependency level but below full buy-out level); and how members should benefit, with suggested factors to take into account.
TPR will consult later this year on more detailed guidance to sit alongside the final regulations.
Read the consultation, draft regulations and TPR guidance.
Consultation on pension transfer regulations
The DWP has published a consultation on proposed amendments to the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021, which introduced the red and amber flag system for pension transfers. The first area of focus looks to address concerns with the use of small, self-administered schemes (SSASs) for scams, by introducing a new red flag where the evidence does not demonstrate an employment link between the member and the receiving scheme (meaning a transfer cannot go ahead). The second set of changes addresses operational issues:
- Allowing transfers to ‘reputable’ schemes: schemes will be able to make a transfer where trustees are satisfied, on the balance of probabilities, that the transfer is to a ‘reputable’ pension scheme. The consultation seeks views on a non-exhaustive list of factors which trustees may consider when determining whether a scheme is ‘reputable’.
- Overseas investment amber flag removed: the overseas investment amber flag will be removed, reflecting the reality that many legitimate schemes include overseas investments.
- MaPS guidance exemption for pot consolidation: members who have taken MaPS guidance within the last 12 months will be exempt from having to repeat it when consolidating multiple pots.
- Incentives flag retained: despite calls to remove the incentives red flag, the DWP has concluded that this provision remains an important and effective scams indicator.
The consultation closes on July 21, 2026. The DWP has indicated that this is the first stage in a broader program of work relating to pension scams and pension transfers, with further work later this year to explore how transfer processes can be modernized.
Read the consultation.
HMRC: updated VAT guidance
HMRC has made updates to its VAT input tax manual building on a policy change announced in June 2025 in relation to VAT deduction on costs relating to the management of assets held in DB occupational pension schemes.
Since 2014, following the CJEU’s ruling in PPG Holdings, HMRC’s position has been that employers could recover VAT in relation to investment management services provided to DB schemes, where the employer both commissions the service and pays the cost directly. Arrangements to enable VAT deduction in these circumstances include VAT grouping and the pension scheme trustees supplying administration services to an employer. However, within the context of those arrangements, where there was dual use of investment costs by both the employer and the scheme trustees, HMRC required a method of apportionment on a fair and reasonable basis to determine how much input tax could be deducted by each party.
The June 2025 announcement stated that HMRC no longer views investment costs as being subject to dual use. Instead, all the associated input tax incurred will be seen as the employer’s and deductible by the employer, subject to normal deduction rules. In addition, where trustees are supplying pension fund management services to the employer and charging for them, they will also be able to deduct input tax incurred for the purpose of providing those services, provided they are VAT-registered. Any deductions by the trustees will be subject to normal deduction rules and any claims for additional input tax will be subject to the normal four-year cap.
In the new guidance, HMRC confirms that input tax incurred by an employer on services provided in relation to its funded occupational pension scheme will be the employer’s input tax and is recoverable in full, subject to any partial exemption restrictions. This is the case whether the costs incurred relate to administration or investment management. So, if the employer contracts directly with a provider of fund management services, it can deduct the input tax incurred. The invoice may be in the name of the employer or ‘care of’ the employer. However, invoices correctly made out to a trustee may not be re-issued to the sponsoring employer – the input tax would be for the trustee to deduct in line with its VAT recovery position. If the contract for fund management services is between the fund manager and the trustee, then to enable the employer to deduct, it would require the trustee to make an onward charge to the employer for their services in running the scheme.
Schemes and employers should review the updated guidance and, if appropriate, take tax advice on their current structures and invoicing practices. It’s worth noting that HMRC confirms that the existing rules for input tax deduction continue to be available to taxpayers going forward, together with the newer options.
Read the updated VAT manual.
Consultation: impact of GMP conversion on annual allowance protection
HMRC has published a consultation on draft regulations intended to prevent annual allowance protections (namely, the ‘deferred member carve-out’ (DMCO)) being lost when pension schemes equalize Guaranteed Minimum Pensions (GMPs) using the DWP’s statutory conversion method. The regulations amend the tax rules, including how the annual allowance is calculated, so that where GMP conversion is carried out, deferred members who would have qualified for the DMCO continue to benefit from it. The consultation closes on July 13, 2026.
Read the draft regulations.
TPR: updated Virgin Media guidance
The Pensions Regulator has updated its guidance on remediation for past alterations to salary-related contracted-out pension schemes for schemes with potentially invalid historic alterations following the Virgin Media decision. The changes are minor, reflecting that the Pension Schemes Bill 2025 received Royal Assent on April 29, 2026, and the potential remediation measures have now come into force.
Read the updated guidance.
Company accounts reforms
The government has announced that it will proceed with accounts reforms measures set out in the Economic Crime and Corporate Transparency Act 2023 (ECCTA), including the following:
- Requiring small companies and micro entities to file profit and loss accounts with Companies House as other companies do, but with the option to opt out of publishing this information on the public register.
- Requiring all companies to file their annual accounts via commercial software.
- Removing the option for companies to file abridged accounts.
- A strengthened eligibility statement for all companies claiming an audit exemption.
- Requiring component parts of the filed accounts and reports to be filed together.
To give companies more time to prepare, this package of reforms will now come into effect from April 2028, rather than April 2027 as originally proposed. These changes may impact corporate trustees.
Read the written ministerial statement, press release and updated Companies House guidance.
