The Pensions Regulator estimates that around 90 per cent of schemes are now in surplus, while 80 per cent are in surplus on a low dependency basis and 60 per cent are in surplus on a buyout basis.
This is according to its latest Annual Funding Statement, which suggests that most defined benefit pension schemes are now expected to focus on endgame planning rather than deficit recovery as funding levels remain strong.
TPR said most schemes in the 2025/26 valuation cycle are likely to be shifting away from deficit repair and towards longer-term planning, including buyout, run-on strategies and other endgame options.
The regulator expects around 80 per cent of schemes to be able to meet Fast Track funding requirements under the new defined benefit funding regime, reducing regulatory burden and reporting requirements for many trustees.
TPR also flagged upcoming changes linked to the Pension Schemes Act 2026, including new rules on surplus release, with further guidance expected ahead of regulations due to come into force in 2027.
Hymans Robertson head of DB scheme actuary Laura McLaren says: “This year’s Annual Funding Statement reinforces themes that are now fairly well established – applying the new funding code in practice, navigating endgame decisions and managing surplus – while also signalling further regulatory guidance and wider industry developments. Despite geopolitical and market uncertainty, scheme funding remains resilient, with TPR estimating that as many as 60% of schemes are now in buy out surplus. The shift from deficit repair to long term planning is clearly here to stay.
“With many schemes still completing their first valuations under the new regime, it’s no surprise that the statement continues to clarify requirements and address common queries. Insight on actual submissions remains limited, but TPR plans to analyse 2025 valuation statements once received, which should bring some helpful transparency around how strategies are being assessed.
“Although TPR hasn’t shared a precise Fast Track/Bespoke split, early indications that around 80% of schemes could meet Fast Track at little or no employer cost look about right. Keeping Fast Track parameters unchanged provides welcome stability. Notably, TPR emphasises an “objectives first” approach before choosing Fast Track or Bespoke, echoing our view that strategy should lead and compliance should follow.
“Trustees are also encouraged to consider endgame options and develop surplus policies. This is particularly timely given the new Pension Schemes Act, which lays the groundwork for surplus use. The focus now shifts to implementation, and it’s positive that TPR will publish further guidance in the coming months, including some early views on surplus use ahead of more detailed regulations. Getting this important guidance right will be essential to ensure schemes, trustees and employers can engage confidently while protecting member outcomes.
“Overall, we welcome the sense that valuations are increasingly becoming strategic tools, an opportunity to refine long term plans and assess progress. Indeed, after a transformative period for DB schemes, trustees and sponsors should seize this moment to review and strengthen strategy, whether or not a valuation is currently underway.”
Barnett Waddingham principal Mark Tinsley says: “With funding levels still strong, it is encouraging to see the regulator clearly signal that trustees and sponsors should now be focusing on endgame planning, including considering intentional run‑on and the use of surplus. TPR is also right to be clear that these discussions should not be deferred while the industry waits for further regulation or guidance. This is work that needs to be happening now.
“We strongly agree that endgame objectives should be shaping valuations and investment strategy. However, in practice many employers remain reluctant to explicitly state buy‑out as their long‑term objective in the statement of strategy, largely due to concerns about unintended consequences. As a result, despite the regulator’s intentions, we expect the statement to remain more of a compliance exercise than a strategic tool for many schemes.
“TPR’s warning against complacency is also timely, particularly given ongoing geopolitical instability and growing cyber risk. Finally, it is welcome to see the regulator urging schemes to move quickly on resolving Virgin Media issues following Royal Assent of the Pension Schemes Act 2026, allowing trustees and sponsors to finally draw a line under years of uncertainty.”
