The majority of trustees and DB pension managers plan to adopt new rules, giving them more flexibility on using scheme surpluses, according to research from XPS Group.
The poll found that 58 per cent of respondents said they intended to adopt the new rules, which come into force next year and are designed to allow surplus funds in DB schemes to be released, and paid out to the sponsoring employer and members.
When looking at how schemes might use these new rules, 75 per cent of those surveyed said they expect to set a surplus release threshold above low dependency or buyout, incorporating an additional buffer.
A similar proportion (75 per cent) said that members should receive a share of any surplus funds released, although XPS Group said there were a wide range of view on the appropriate proportion they should receive.
This research was conducted among 200 trustees, pensions managers and sponsoring employers. This was part of a wider panel discussion with The Pensions Regulator and other industry professionals, focused on the importance of setting a surplus policy in advance to agree these key elements.
The discussion also looked at the the opportunities for schemes of all sizes to benefit from these new flexibilities, whether they were intending to run on for the long term or secure benefits with an insurer.
XPS Group head of DB run-on Tom Froggett says: “It is encouraging to see a clear majority of schemes already intending to adopt the new DB surplus flexibilities.
“As trustees and employers look ahead to the April 2027 implementation date, the focus now needs to shift to putting the right frameworks in place, with well-defined and documented surplus policies at their core.
“There are still important legislative and regulatory details to be finalised, and getting the balance right between member security and employer flexibility will be crucial in ensuring this strong initial appetite translates into widespread adoption.”
He adds it was also encouraging to see a high proportion of respondents intending to include funding buffers when setting the level at which to release surplus. Frogget says: “In our experience, trustees and employers are generally aligned on running these buffers rather than extracting surplus at the lowest possible threshold, helping provide security for members and stability of surplus flows for employers and trustees.
“All schemes, whether they are looking to insure or run on for the long term, can investigate how the new surplus flexibilities can support their objectives. For example, we are seeing many schemes looking to use the new flexibilities between the point of insurance buy-in and buy-out to accelerate refunds of surplus to the sponsoring employer where appropriate.
“Views on how surplus should be shared with members remain more varied. This is ultimately a scheme-specific decision, and trustees and employers will need to approach these discussions with a clear strategy to ensure the overall arrangement meets their respective objectives.”
