DB trustees divided on surplus reform as buy-out certainty gains appeal

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• Two fifths of trustees uncomfortable with proposed surplus reforms in Government’s Pension Schemes Bill, new Standard Life research reveals
• Trustees split on how sponsoring employees might use funds if released

Nearly two fifths (39%) of defined benefit (DB) trustees are uncomfortable that proposed surplus reforms are in scheme members’ best interests. New research from Standard Life highlights a growing divide among trustees with significant concern from some surrounding the impact of surplus reforms on member outcomes and long-term scheme strategy.

The Government’s Pension Schemes Bill aims to unlock defined benefit surpluses to support both member outcomes and broader economic growth. However, when asked to what extent the current proposals were in scheme members’ best interests, the research found that only 32% of DB trustees felt very or generally comfortable with the reforms, while 29% had no opinion.

Claire Altman, MD – Pension Risk Transfer & Origination, at Standard Life, commented: “While there is growing interest in how proposed flexibilities can be applied in practice, this research shows that views on surplus extraction are mixed. Trustees are right to be cautious. There are trade-offs at play, both in trustees’ ability to act now to secure members’ benefits, and in the legislative uncertainty that comes from waiting for surplus rules to be clarified. Trustees recognise the value of certainty gained from insurance as a secure and well-proven solution, and our research reflects this, with 48% of schemes favouring buy-in as their endgame strategy.”

The findings also highlight variation as to how surplus funds might be used, emphasising the need for bespoke approaches and underlying the challenge for regulation in making sure that decisions are being made in the right way and reflect both trustee and sponsor considerations.

When asked how they expect surpluses to be used, trustees highlight interest in enhancing member benefits (38% of trustees surveyed), supporting sponsor business growth (38% of trustees surveyed), and reducing DC employer contributions (35% of trustees surveyed).

Claire continued: “This diversity of trustee expectations reflects the broader debate within the industry and within schemes themselves about the role of surplus in scheme strategy. It is hard to strike the right balance between supporting the sponsoring employer, improving member outcomes and supporting broader workforce benefits, while also considering the fiduciary and legal implications of surplus extraction, particularly in the absence of clear legislative guidance.

“For trustees and sponsor employers, there will be multiple considerations that have to be factored in when thinking about surplus. However, for trustees, surplus extraction decisions will hinge on confidence that this aligns with their duties to act in members’ best interests. These decisions are not easy at the best of times but are even more challenging when we are expecting legislation to be further developed. Trustees are also facing into potentially changing dynamics, as covenants are not static, nor are longevity projections or market conditions and they all factor in, to a lesser or greater extent depending on scheme specific circumstances, to how decisions are reached.”

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Notes to editors

• Research conducted by Incisive Media on behalf of Standard Life in August 2025 amongst 100 DB Pension Scheme Trustees, of Schemes larger than £100m

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