Legal & General is offering a new solution for defined benefit (DB) pension schemes to transfer surplus funds into defined contribution (DC) arrangements, including its £30bn Mastertrust.
Around 75 per cent of DB schemes are now in surplus on a low-dependency basis due to higher gilt yields, and L&G says its framework offers trustees and sponsors a way to redirect this excess to support DC members, ahead of anticipated rule changes to ease surplus extraction.
The provider says the option, subject to scheme rules, gives employers a way to reduce DC contribution costs or boost member outcomes, without affecting existing DB liabilities. All transfers must comply with scheme rules, tax legislation, and fiduciary duties.
L&G Mastertrust chair of trustees Robert Waugh says: “The Trustee Board were pleased to recently approve the transfer of defined benefit surplus funds into L&G’s Mastertrust, recognising its potential to increase the security of ongoing contributions to members’ savings in a transparent and well-governed way. This is a timely solution that provides long-term benefits to DC savers, while maintaining the high standards of oversight and compliance that underpin the Mastertrust.”
L&G CEO, DC & Workplace Savings Paula Llewellyn says: “As regulatory and policy developments create new opportunities for pension schemes, we’re well positioned to support trustees and sponsors with solutions that unlock value responsibly and help deliver better member outcomes. The discussion of how to efficiently utilise DB surplus funds has been steadily growing in recent years as clients seek to prepare their endgame strategies. Our surplus transfer capability reflects the maturity of the DB market and the growing need for joined-up, cross-scheme thinking to help improve retirement adequacy across generations.”
