The Pensions Regulator’s 2025 Annual Funding Statement – a key point for Defined Benefit Scheme Sponsors
2 May 2025
3 min read
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TPR recommends trustees have a policy on the use of surplus. We recommend Scheme sponsors discuss that with their trustees.
On 29th April 2025, The Pensions Regulator (TPR) published its 2025 Annual Funding Statement, (2025 AFS) in relation to Defined Benefit (DB) Schemes, particularly those Schemes producing valuations from 22 September 2024 to 21 September 2025.
This marks the first time schemes will complete their valuations under the new DB funding regime, which requires a more integrated and collaborative approach between trustees, employers, and advisers. With 76% of DB schemes already fully funded on a low dependency basis, TPR emphasised the need for most schemes to shift focus from deficit repair to end game planning.
There has been lots (and there will be lots more) of commentary for scheme sponsors about TPR’s approach and the requirements of the new regime – in particular that TPR’s updated covenant guidance confirms a “proportionate approach” can be taken when assessing the employer covenant (see the 2025 AFS for some clarifications on TPR's approach). Contingent assets are also interesting. Do you have in place a parent company guarantee? If yes, do you know if it is “lookthrough”?
Scheme sponsors who haven’t already considered if their guarantee is “lookthrough” or what the regime as a whole means for their funding discussions may want to reach out to advisers to get more information. We recommend doing this even if a Scheme’s valuation isn’t in this tranche.
However, there is one particularly interesting point for Scheme sponsors that struck us from the 2025 AFS. This is that TPR says “It is good practice for trustees to have in place a policy for the release of surplus in the context of their individual scheme, and they may wish to start thinking about how they would approach any requests to release surpluses from the employer”.
We therefore expect that DB scheme sponsors will want to start planning – indeed will want to start working on a written policy – with their trustees. A key early part of this will be understanding the legal powers relating to use of surplus in your scheme. If you haven’t already done so, we recommend starting those conversations with your trustees and advisers now. (There is no time like the present even if it is not possible or desirable for a scheme to release surplus at the moment. Having agreed expectations in a written policy can help the process when the time for surplus distribution does come around).
If you would like to discuss the options for use of surplus from DB schemes then please contact Chris Brown, Partner, or your usual contact in the Burges Salmon Pensions and Lifetime Savings team.
"We know there is increased interest on scheme funding surplus and the potential release of those surpluses."