Section 251 of the Pensions Act 2004 may prevent surplus held in certain pension schemes from being repaid to an employer unless the trustees of the scheme have made a resolution preserving their power to make such a payment. Notably, this only applies to ongoing schemes.

The deadline for such a resolution is 5 April 2016, but when the three months’ advance notice that must be provided to members and employers is considered, action must be completed by the trustees before 5 January 2016.

Trustees are not required to pass a resolution, but should consider whether they should do so in order to preserve this power. 

There are several reasons for retaining this power. 

  1. Although many funds are currently in deficit, this may not be the case in the future, and a lack of a power to repay surplus could leave assets locked into the scheme. 
  2. In order to maintain the security of members’ pensions, trustees will want employers to fund schemes to as high a level as possible – if there is no ability to reclaim surplus once schemes are fully funded, employers may be discouraged from providing a high level of funding.
  3. The power to repay surplus may have a significant effect on employers’ accounts.

Where this matter remains unresolved, trustees should consider whether it is in their members’ interests to retain this power, and where it is considered appropriate should take prompt action to ensure the upcoming deadline is not missed.