Superfunds engagement response

Published: 9 October 2025 

Background 

In July 2024, we updated our interim superfunds guidance to set out a mechanism to allow the release of capital under the current regime. Following industry engagement, we decided it was appropriate to set out a threshold-based mechanism that also makes sure that capital is not released when there are sudden spikes in funding due to market changes. Whilst the formula set out in the update fulfils this to an extent, it has been identified that it does not limit the amount of capital that can be released in the way that was intended. 

As a consequence, we undertook an engagement exercise setting out the issues and why we felt the need to make a minor wording change to the guidance. 

We received a number of responses from key stakeholders, including pension consultants and industry trade bodies.    

This response summarises the feedback we received and considered following our engagement. In particular, it sets out each area where we asked stakeholders for input, a summary of their responses, and our conclusions. 

We have now published an updated version of the superfunds guidance to incorporate this change. 

Please note that, whilst superfunds are included in the upcoming Pensions Schemes Bill, the interim regime will continue to operate and will be reviewed as necessary in relation to market developments (for example, discount rate reviews) until such time as the longer-term regulatory regime for superfunds is in place. 

What has changed? 

Original guidance wording: 

The wording of the guidance confirmed that a superfund must select a capital release funding test date. There can be no more than two dates a year separated by at least six months. It further stipulated that: 

Capital may be released only if each of ratio A and ratio B exceeds 33%. 

• Ratio A: Surplus ratio on the date of the capital release funding test. 
• Ratio B: Average of the surplus ratios on each of the six month-end dates preceding the date of the capital release funding test. 

The rationale for the test was explained in the engagement response we published alongside the last guidance update as follows: 

“To reduce the likelihood that capital released is from surplus as a result of short-term market movements, and to avoid superfunds cherry-picking favourable dates, we expect superfunds to nominate capital release calculation dates at the outset, look back from those dates over the preceding month-ends, and take an average. The period over which the average is to be taken is six months. We consider six months to be long enough to smooth the surplus calculation over a reasonable period and a number of market data points. It also allows superfunds two opportunities annually, six months apart, to release capital. If the trigger is met on the capital release calculation date, and for the average of the preceding six months, surplus capital may be released. Capital may be released only to the extent that, had it been released on the date of the capital release funding test, neither ratio A nor ratio B would have been below 33%.” 

Issue identified with original wording 

As it stood, the wording did not restrict the amount of capital that could be released under ratio B by taking into account the funding level on the capital release date. This was because the wording of ratio B did not include the capital release date. Therefore, ratio B would have been unaffected by the amount of surplus that was released on the date of the capital release funding test. 

Updated wording 

We have now updated the guidance with the following wording: 

• Ratio B: Average of the surplus ratios on the date of the capital release funding test and each of the five month-end dates preceding the date of the capital release funding test. 

We have also added the following definition to ensure that ‘surplus ratio’ is interpreted as we intended: “The surplus ratio on any date is the surplus on that date divided by the minimum capital buffer on that date.”  

Summary of feedback received 

Most respondents agreed that the proposed amendment, clarifying the definition of the surplus ratio and adjusting the timing of the Ratio B test, was a helpful and intuitive improvement. It was noted that the change aligns with common assumptions and avoids potential misinterpretations. Some responses highlighted that while the amendment may not materially affect the amount of surplus that can be withdrawn over time, it could influence the timing of withdrawals. One stakeholder suggested that the change might slightly weaken the rules if a sudden spike in funding level occurs on the test date but acknowledged that this was not the policy intention and supported the change overall. 

Additional suggestions included ensuring consistency across related sections of the guidance, such as asset valuation and definitions, and clarifying whether test dates must be month-ends. One response raised operational considerations, such as the need for monthly stochastic modelling even if capital release is planned annually.  

Our response 

We are happy that the updated wording clarifies the intent behind capital release and although we have not taken the other suggestions on board, we will consider them for further updates that may be needed to the guidance in due course. 

We would like to thank all the respondents who took their time to provide their feedback.