PSI20.6.12 - Funding and Surpluses: Surpluses - General - Unallocated or Contingency Funds - Elimination

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN13.18]

Whenever such a valuation reveals a surplus of more than 5% of the value of the liabilities, the administrator is required to reduce it to this level. Various methods for eliminating the excessive surplus are prescribed and the administrator may choose whichever method or combination of methods he considers appropriate. One of the prescribed methods is a payment to the employer and as far as the Revenue is concerned this is as acceptable a method as any other. However, section 108 of the Pension Schemes Act 1993 requires certain schemes to introduce limited price indexation (LPI) of pensions before a refund is made to the employer.

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