HMRC’s proposals to enable defined benefit (DB) pension schemes to make direct authorised member surplus payments (AMSP) must work in practice, including restrictions on schemes winding up and requirements imported from employer surplus payments, the Association of Consulting Actuaries (ACA) has said.

Responding to the policy paper on DB pension scheme surplus payments to members, the ACA urged HMRC to reconsider the proposed ban on new member surplus payments during wind up.

The association argued trustees may only be able to assess the available surplus once benefits have been bought in and costs are clearer, with a ban potentially pushing schemes towards increasing insured benefits instead and delaying both member benefits and tax receipts.

ACA Pensions Taxation Committee chair, Kirsty Cotton, explained: “As well-funded ongoing DB schemes gain the flexibility to return surplus to employers, it is only right that members should also have a workable route to receive a share of surplus directly. However, trustees of schemes winding up would welcome a similar option.

“Excluding these schemes risks cutting off that flexibility at exactly the point when trustees may have much greater certainty over what surplus is genuinely available.

“Removing the option of making a straightforward taxable payment at that stage could drive schemes towards less flexible alternatives.”

The ACA also warned the proposed legislation on paying members appears to have been “imported wholesale” from the process for employer surplus payments.

The ACA’s response said the requirements around notification, actuarial certification and timelines should be reconsidered to avoid deterring trustees from using the new flexibility.

Cotton said: “If applied literally, the apparent requirement to pay potentially thousands of members within five working days would be impractical and risks undermining the purpose of the reform.

“The rules should support, rather than constrain, sensible decisions to share surplus with members.”

The ACA also called on HMRC to clarify how AMSPs should be treated when members transfer benefits or schemes enter wind-up, warning that a lack of clarity could create practical difficulties and unintended tax consequences.

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