SPP supports surplus payments but urges simpler rules

In response to the draft legislation and technical documents associated with the Finance Bill, the Society of Pension Professionals (SPP) has expressed its support for the proposed introduction of Authorised Member Surplus Payments (AMSPs). This new provision aims to provide trustees with a practical method for distributing pension scheme surplus to members, facilitating a more equitable sharing of funds.

Despite this positive reception, the SPP has raised concerns about the limitations imposed by the requirement that only members who have reached the normal minimum pension age (NMPA) can receive these payments. The Society argues that this restriction could significantly diminish the effectiveness of the AMSPs and lead to additional administrative and communication challenges for both trustees and members. In light of these concerns, the SPP is advocating for the removal of the NMPA restriction entirely, drawing on analogous provisions for Winding-up Lump Sums to strengthen its case.

If the removal of the restriction proves unfeasible, the SPP recommends a compromise solution where immediate AMSPs could be made available for members under the NMPA, albeit with a cap—potentially set at £18,000—with any larger payments deferred until the member reaches NMPA. This approach would ensure that younger members still have access to some benefit from the surplus while maintaining a manageable framework for trustees.

Additionally, the SPP has stressed the need for clearer guidance concerning the tax and regulatory implications associated with AMSPs. It highlights important considerations such as obtaining employer consent, notifying members, and how deferred payments are handled in the event of a member’s death or transfer of benefits.

Katie Banks, a member of the SPP’s Legislation Committee, emphasized the importance of simplicity within the new framework, stating that “The SPP welcomes AMSPs as a practical way for trustees to share surplus with members, but the current NMPA restriction risks making the new provision far more complicated than it needs to be. The priority should be a simple, workable framework that allows members to benefit from surplus without creating unnecessary administration, uncertainty or poor member experiences.”

The Society's official consultation response can be found on their website for those who wish to review it further.