UK defined benefit (DB) pension schemes have become stronger and more flexible, but trustees still face key decisions as market conditions and policy change, according to the Society of Pension Professionals (SPP).
The analysis highlights that the 2025 Pensions Bill’s flexible surplus rules could increase member benefits and provide employer refunds, but success depends on trustee expertise and sponsor strength and not all schemes will benefit.
According to the SPP, DB schemes have improved resilience since the 2022 gilts crisis. LDI strategies have been recalibrated, interest rate buffers have been increased, and governance has been strengthened. Most schemes are well hedged against interest rate and inflation risk, with longevity remaining the main exposure.
The SPP also points to changes in market conditions, including higher gilt yields, quantitative tightening, and longer gilt maturities. These trends support funding for some schemes but raise questions about future sovereign debt. It notes that run-on strategies, outsourced arrangements and DB master trusts are becoming more common.
It also highlights that Local Government Pension Schemes (LGPS) reforms are driving consolidation, strengthening governance and supporting greater local investment. Additionally, it says that insurer capacity has grown, supporting record bulk annuity volumes and allowing more flexible investments.
The SPP says the Pension Protection Fund (PPF) is strong and is likely to increase benefits for more than 250,000 members from before 1997.
It adds that the UK DB system is more resilient, flexible and policy-driven than at any time this century but schemes must manage risks including longevity, rising yields and consolidation to deliver good outcomes for members and sponsors.
Aptia head of technical John Wilson says: “We welcome the Society of Pension Professionals’ latest research, which provides a timely and thoughtful analysis of the evolving DB investment and wider landscape. It also complements our ongoing research into unlocking pension scheme surpluses which has the potential to put billions of pounds of trapped capital in DB pensions to more productive use, benefiting members, employers and the UK economy.
“Amid these developments, it is vital to recognise the foundational role of pension scheme administrators as custodians of the data that underpins every strategic decision – whether it relates to funding, investment, de risking or long-term planning. High quality and accurate data ensures that schemes can respond effectively to regulatory change, support trustees, and deliver the right outcomes and improved experiences for members.
“Robust administration is crucial as the industry continues to explore run on strategies and new endgame options such as superfunds. But just as important is ensuring that members receive clear communication, timely service and confidence that their benefits are being managed with care. Administration teams are at the heart of delivering that experience, ensuring that operational standards remain strong throughout periods of change.
“The SPP’s analysis rightly highlights the progress made across the DB ecosystem. Ensuring that administration is fully recognised as a strategic pillar – not simply an operational function – is essential in realising the opportunities and managing the risks that lie ahead.”