HL UK Pensions Law Digest 19 November 2025

Welcome to our latest update, in which we cover:

• Sole corporate trustees: updated Code of Practice
  • The Association of Professional Pension Trustees (APPT) has strengthened its expectations of sole corporate trustees.
• DB surplus release: SPP paper
  • The Society of Pension Professionals explores the issues surrounding trustee and employer decisions to release surplus from DB schemes.
• The Pension Protection Fund (PPF) publishes levy consultation for 2026/27
  • The PPF proposes to maintain a zero levy for the year 2026/27.

Please note that we will cover recent case law developments in a future Digest; specifically, Brambles Administration Limited v Harvey and AD Bly Groundworks and Civil Engineering Ltd v Revenue and Customs Commissioners. 

Sole corporate trustees: updated Code of Practice

The Association of Professional Pension Trustees (APPT) has issued an updated version of its Code of Practice for Professional Corporate Sole Trustees (PCSTs). The updated Code will have effect from 1 January 2026.

The Code sets out the APPT’s expectations for how PCST appointments are operated. APPT members are required to follow the Code, except if this would (in exceptional circumstances) conflict with overriding legal duties or requirements of professional bodies.

Updates to the Code include:

• In relation to the initial appointment of a PCST, the PCST should seek:
  • To ensure the adequate transfer of knowledge about the scheme from previous trustees and incumbent advisers; and
  • A statement from any outgoing Professional Trustee setting out the circumstances of their resignation or removal;
• Where an APPT member already acting as a trustee of a scheme becomes the sole trustee of that scheme (and therefore a PCST), the PCST should try to make the sponsoring employer aware of different possible governance arrangements for the scheme, which might include the appointment of further trustees;
• Strengthening expectations of independence from the sponsoring employer and management of conflicts of interest, including in relation to any additional services provided by the PCST firm;
• Where legislation requires trustees to obtain professional advice, a PCST must obtain that advice from the scheme’s appointed advisers and must not rely on advice from their own firm (or an affiliate firm); and
• Where a PCST firm has material relationships with preferred external providers, the PCST must give written details of those arrangements to the person responsible for their appointment as PCST of a particular scheme.

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DB surplus release: SPP paper

The Society of Pension Professionals (SPP) has issued a paper, “DB Surplus Release: risks, rewards, & responsibilities”, considering the issues surrounding decisions to release surplus and the potential impact of the forthcoming new powers for trustees in the Pension Schemes Bill.

Points of interest in the paper include the following.

• Although regulations are expected to reduce the minimum funding threshold for surplus release to the low-dependency funding basis, trustees are likely to want to build in margins above this level. In some cases, the threshold set by trustees may be close to, or higher than, the estimated buyout level.
• Factors to be considered by trustees and employers when considering surplus release and running on include: managing members’ expectations and perceived unfairness; investment strategy, including hedging and managing cashflow; monitoring covenant and strengthening protection; the potential for reputational risks; the impact of benefit improvements and funding volatility on corporate accounts; managing conflicts of interest (impacting the employer, trustees or advisers); any impact on insurance cover; governance issues; and expectations of the Pensions Regulator (TPR).
• TPR encourages all DB schemes to develop a policy on surplus release. The SPP comments that this may form part of a wider decision-making framework and/or a legal agreement setting out such matters as: the frequency of decisions on surplus release; agreed funding level(s); how surplus may be shared between the employer and members; and action to be taken if the funding level or the employer covenant deteriorate.
• Trustees’ long-term strategies may be subject to greater scrutiny, as members of different schemes, or of different cohorts within the same scheme, receive different pension outcomes. Intensive scrutiny is likely if a scheme fails to pay full benefits following a decision to release surplus.
• Conversely, the paper suggests that trustees who insure scheme benefits may face calls to compensate members for loss of potential discretionary increases, in cases where the insurance does not clearly increase benefit security (such as where the employer covenant is strong).
• Running on, with the potential for surplus release and benefit increases, may only be economically possible for larger schemes. Members may therefore face a lottery of outcome based on scheme size. New solutions, such as developments in the DB master trust market, may help address this.

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The Pension Protection Fund (PPF) publishes levy consultation for 2026/27

On 17 November, the PPF published its proposals for the 2026/27 levy.

The PPF's consultation document proposes to maintain a zero levy for 2026/27 for conventional schemes, provided that there is sufficient legislative progress with the levy provisions in the Pension Schemes Bill. These provisions give the PPF flexibility to reduce the levy to zero but also allow the PPF to reinstate the levy if required in future.

The consultation also confirms the PPF’s intent to continue to charge an Alternative Covenant Schemes (ACS) risk-based levy, in light of the fact that the risk posed to the PPF from an ACS is investment risk rather than failure of a corporate business.

The consultation closes on 5 January 2026.

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Authored by Jill Clucas and Susanne Wilkins.