New findings from Barnett Waddingham (BW), part of Howden, reveal that as the DB pension scheme landscape increasingly moves beyond traditional buy-out approaches, trustees are feeling growing pressure over how any future scheme surpluses should be used.
The research, ‘The Retirement Runway’ – which surveyed 50 professional trustees of DB pension schemes – reveals a consensus among trustees that there is growing pressure from government or sponsors to utilise scheme surpluses in ways that may conflict with their fiduciary duty to members. One in five (20%) describe this pressure as significant, while the remaining 80% said it exists to some extent.
The findings also highlight how changing endgame strategies are bringing new questions around surplus generation to the forefront of trustee decision-making. More than four in five (82%) professional trustees of all scheme sizes agree that low dependency is now a more appropriate long-term funding target than buy-out, while medium-sized schemes are now most likely to favour run-on with employer support (50%)
Against this backdrop, nearly two-thirds (62%) of professional trustees said they would be more likely to consider run-on strategies to generate surplus under reforms now enacted through the Pension Schemes Act 2026.
The findings point to a significant shift in scheme strategy over the last 12 months, Among medium-sized schemes, 35% have moved from self-sufficiency to run-on, while two-thirds (67%) of large-sized schemes have shifted from buy-out to self-sufficiency.
Trustees indicate that run-on strategies are increasingly being viewed as a way to generate additional value from well-funded schemes. Among medium-sized schemes pursuing growth strategies, over half (58%) said they are exploring generating a ‘super surplus’ for discretionary member benefit increases. An equal proportion said surplus generation could support refunds for the sponsoring employer.
Meanwhile, smaller schemes remain more focused on strengthening their funding positions: over half of trustees of these schemes (53%) saying growth-focused investment strategies are aimed at reducing deficits.
Alex Pocock, Managing Partner, Barnett Waddingham, part of Howden, comments:
“DB schemes are entering a new phase. Improved funding positions mean most trustees now have more options on the table than they did just a few years ago: whether that’s buy-out, superfund, low dependency, self-sufficiency or run-on. In a sense it’s not surprising at all – many schemes that wanted to buy-out have now done so, leaving those still in the market pursuing flexibility.
“The debate around surplus use is a natural consequence of that progress. Trustees will recognise the opportunities that surplus capital can create, but our findings show that they’re also firmly focused on their responsibilities to act in members’ best interests.
“It’s understandable that policymakers want to create greater flexibility and make better use of surpluses, but that doesn’t have to come at the expense of member outcomes. The recent surplus proposals are a positive step forward, but trustees will still need the confidence to make use of these new flexibilities while remaining aligned with their fiduciary duties. As more schemes weigh up these options, balancing member, sponsor and trustee interests will be critical.”
