It is generally true, subject to the precise wording of the rules of any particular pension scheme, that pension fund trustees have a wide discretion as to how to allocate any surpluses which their fund actuary may certify as having arisen (see for example Edge & ors v Pensions Ombudsman & anor CA 2000 ICR 748). The position was examined in great detail first by the High Court in 1997, then by the Court of Appeal (in 1999) and finally by the House of Lords (in 2001) in the case noted above.

National Power v. Feldon and ors and National Grid Company plc v. Mayes concerned the proper treatment of pension fund surpluses amounting to several hundred million pounds which had accrued in the electricity industry pension schemes. Substantial amounts of the surpluses were used to improve benefits for members (employees and ex-employees) and other substantial amounts were used to discharge the employers' liability to make additional pension contributions in respect of redundant employees. Some pensioners claimed this was unlawful. The pensioners lost in the High Court, won in the Court of Appeal but eventually lost again in the House of Lords in April 2001.

The House of Lords has thus effectively reinstated the 1997 High Court ruling that, subject to the rules of a particular scheme, it is lawful for employers (who of course have liabiities to top-up a pension fund if it is in deficit) to use actuarial surpluses in that fund if it is in surplus towards settlement of liabilities they have to that fund. However it was not necessary for the House of Lords to decide the knotty question of who owns pension fund surpluses as a matter of general principle, and they did not do so.

As a matter of law a main point of the case is that it confirms that in law the release of a debt is not the same as a payment, overturning the High Court 1994 ruling to the opposite effect in British Coal Corp v British Coal Trustees Ltd ChD 1994 ICR 537, Ch D.

The precise position in any particular case is likely to turn on the proper construction of the Trust Deed(s) and rules of the particular scheme. An important example is Stevens & ors v Bell & ors [2002] EWCA Civ 672, on 20th May 2002, in which the Court of Appeal held that the British Airways Pension Scheme trustees had a positive obligation to come to a decision as to how to apply an actuarially calculated surplus, had power to use the surplus to offset against outstanding unpaid employer contributions but (overruling the High Court) did not have power to make an actual refund to the employer.