Defined benefit pension trustees face increasing pressure from the government and employers to use new surplus release rules, even when these requests conflict with their legal duties, according to recent research.
Pressure mounts as schemes reconsider endgame strategies
A survey of 50 professional trustees by consultancy Barnett Waddingham revealed every participant experienced pressure to return cash from overfunded schemes to sponsoring companies. One in five called the pressure “significant.”
Nearly two-thirds of respondents said they were more likely to consider keeping schemes open longer to generate surplus rather than pursuing insurance buyouts. Most now see a low dependency funding basis as a better long-term target than full buyout.
Over the past year, a third of medium-sized pension schemes shifted from self-sufficiency to run-on models. Among large schemes, two-thirds moved away from insurance buyout toward self-sufficiency. Some now target a “super surplus” to fund discretionary member benefit increases or repay employers.
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Alex Pocock, managing partner at Barnett Waddingham, said the shift made sense. “Many schemes that wanted to buy out have now done so,” he said. “The discussion about surplus use follows naturally from that progress.”
He noted trustees see the opportunities surplus capital offers but remain focused on member interests. The balance between flexibility and legal duty has become a key issue for the sector.
The changes come as the Pensions Regulator (TPR) shows openness to alternative endgame models. In a recent post, TPR’s executive director for market oversight, Ben Gunnee, wrote that while buyout remains a preferred option, it’s no longer the only path.
Gunnee explained new approaches let trustees reconsider long-term goals, including safely releasing surplus for both members and employers. TPR will work with the government on guidance to keep the regulatory environment strong across market conditions.
Balancing flexibility and legal duty
The push for surplus release is part of a wider discussion about how pension schemes should operate after buyout. Trustees must weigh returning funds to employers against securing member benefits.
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Pocock said flexibility doesn’t have to hurt member outcomes. “The recent surplus proposals are a step forward,” he said. “But trustees will still need confidence to use these options while meeting their legal duties.”
That confidence may be difficult when external pressures exist. The survey showed trustees caught between government and employer demands on one side and member security on the other. Their decisions will determine the future of defined benefit pensions.
The trend is clear: more schemes keep their options open. Whether this improves member outcomes or adds complexity for trustees is uncertain.
TPR’s upcoming guidance may help. But with the regulatory environment still changing, trustees must decide without a full roadmap.
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