First valuation under new DB Code submitted as surplus rules in focus
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The Royal Society’s defined benefit pension scheme has completed the first triennial valuation under the new DB Funding Code. The new regime to secure member benefits is showing first effects just as surplus release is back in focus. The pension schemes bill set to legislate on surplus is having its second reading in parliament today.
The Pension and Life Assurance Plan of the Royal Society submitted under the ‘Bespoke’ route with the help of consultants and actuaries Barnett Waddingham. The Pensions Regulator has confirmed that it is the first completed in the industry, according to Barnett Waddingham.
The consultancy said it was able to accelerate the timeline for the pension scheme’s 1 January 2025 valuation, which was finalised on 30 June 2025, ahead of the 1 April 2026 deadline. The scheme was found to be in surplus on a low dependency basis, allowing the Royal Society to cease its deficit contributions.
Trustee chair Alison Bostock from Zedra Governance said the advisers had provided training and practical advice to help the trustees navigate their first valuation under the new funding code.
“They worked with us to agree an accelerated timetable to meet The Royal Society's request for an early conclusion to the valuation,” she said.
The Royal Society’s chief financial officer, Mary Daly, said: "We are grateful to the trustees and their advisers for their collaborative approach to enable the valuation to be concluded so quickly.”
The new legislative requirements have created additional complexity for well funded schemes, noted Barnett Waddingham partner Helen Turner, adding: “We help trustees navigate these requirements with minimum disruption while ensuring full compliance.”
The new code came into effect for schemes with valuations from 22 September 2024. Under the code, schemes can choose between a Fast Track route – which requires them to base the discount rate on the gilt yield curve and have a minimum duration of 10 among others – or a Bespoke route where schemes are not able or willing to meet all the Fast Track criteria, and which will attract greater scrutiny from the regulator. Schemes must also create a strategy statement outlining their long-term funding and investment journey plan and objectives. The regulator launched a new valuation submission portal on 28 May this year.
The aggregate surplus of UK pension schemes against their long-term funding target is estimated by XPS Group at about £189bn, £26bn higher than a year ago.
The pension schemes bill, which has its second reading in parliament on Monday, is set to introduce measures that will allow DB schemes and their sponsors to release surplus in ongoing schemes.
It is expected that low dependency will serve as a yardstick for when surplus can be accessed. A new survey by the Association of Consulting Actuaries found 61% of respondents favour low dependency or margin above this. More than two-thirds (68%) said schemes should have at least £100m before they can consider releasing surplus.
The ACA is in favour of surplus release but says trustees must be at the heart of decision making. Its members would also like to see movement on the tax treatment of surplus, either having surplus that stays in the trust taxed to encourage surplus use, or tax efficient solutions for moving surplus to defined contribution schemes that sit outside the trust containing the DB scheme.
“Whilst for the time being, the government appears to be addressing the potential constraints in scheme rules but is reluctant to move on other measures that could incentivise the way in which surplus is used, it is hoped that as the bill passes its second Commons stage this week and goes into Committee, the importance of such incentives will be debated,” said ACA chair Stewart Hastie.
“Many trustee boards will likely find it easier to agree appropriate surplus release if the government does permit these incentives and greater flexibilities for pension scheme members to benefit from surplus.”
The Pension and Life Assurance Plan of the Royal Society submitted under the ‘Bespoke’ route with the help of consultants and actuaries Barnett Waddingham. The Pensions Regulator has confirmed that it is the first completed in the industry, according to Barnett Waddingham.
The consultancy said it was able to accelerate the timeline for the pension scheme’s 1 January 2025 valuation, which was finalised on 30 June 2025, ahead of the 1 April 2026 deadline. The scheme was found to be in surplus on a low dependency basis, allowing the Royal Society to cease its deficit contributions.
Trustee chair Alison Bostock from Zedra Governance said the advisers had provided training and practical advice to help the trustees navigate their first valuation under the new funding code.
“They worked with us to agree an accelerated timetable to meet The Royal Society's request for an early conclusion to the valuation,” she said.
The Royal Society’s chief financial officer, Mary Daly, said: "We are grateful to the trustees and their advisers for their collaborative approach to enable the valuation to be concluded so quickly.”
The new legislative requirements have created additional complexity for well funded schemes, noted Barnett Waddingham partner Helen Turner, adding: “We help trustees navigate these requirements with minimum disruption while ensuring full compliance.”
The new code came into effect for schemes with valuations from 22 September 2024. Under the code, schemes can choose between a Fast Track route – which requires them to base the discount rate on the gilt yield curve and have a minimum duration of 10 among others – or a Bespoke route where schemes are not able or willing to meet all the Fast Track criteria, and which will attract greater scrutiny from the regulator. Schemes must also create a strategy statement outlining their long-term funding and investment journey plan and objectives. The regulator launched a new valuation submission portal on 28 May this year.
The aggregate surplus of UK pension schemes against their long-term funding target is estimated by XPS Group at about £189bn, £26bn higher than a year ago.
The pension schemes bill, which has its second reading in parliament on Monday, is set to introduce measures that will allow DB schemes and their sponsors to release surplus in ongoing schemes.
It is expected that low dependency will serve as a yardstick for when surplus can be accessed. A new survey by the Association of Consulting Actuaries found 61% of respondents favour low dependency or margin above this. More than two-thirds (68%) said schemes should have at least £100m before they can consider releasing surplus.
The ACA is in favour of surplus release but says trustees must be at the heart of decision making. Its members would also like to see movement on the tax treatment of surplus, either having surplus that stays in the trust taxed to encourage surplus use, or tax efficient solutions for moving surplus to defined contribution schemes that sit outside the trust containing the DB scheme.
“Whilst for the time being, the government appears to be addressing the potential constraints in scheme rules but is reluctant to move on other measures that could incentivise the way in which surplus is used, it is hoped that as the bill passes its second Commons stage this week and goes into Committee, the importance of such incentives will be debated,” said ACA chair Stewart Hastie.
“Many trustee boards will likely find it easier to agree appropriate surplus release if the government does permit these incentives and greater flexibilities for pension scheme members to benefit from surplus.”
