Overview

Before 6 April 2006, the trustees of occupational pension schemes were required to reduce any funding surplus in their pension schemes if it reached a certain level. One of the ways in which such a surplus could be reduced was to repay it to the pension scheme’s participating employers. The rules of many pension schemes contain a provision which permits the trustees to do this. However, the requirement to reduce funding surpluses was removed from 6 April 2006. Section 251 of the Pensions Act 2004 (Section 251) introduced a transitional power for trustees to resolve to retain the ability to pay funding surpluses to participating employers. The drafting of Section 251 is unclear and may give rise to unintended consequences.

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