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New analysis from LCP sheds light on how trustees and sponsors are approaching surplus distribution as schemes move towards wind-up. With proposed changes to DB surplus flexibilities potentially widening the options available to schemes, LCP says it will be increasingly important for trustees and sponsors to understand the approaches being taken elsewhere, while taking account of their own specific circumstances. |
Key findings from the analysis include:
In around half of cases, the sponsor was the sole beneficiary of the surplus. Members were the sole beneficiary in 14% of cases, while surplus was shared between members and sponsors in 36% of cases.
A refund to the sponsor was the most common individual outcome, accounting for 43% of cases. However, other options were sometimes used, such as redirecting surplus into another group pension arrangement, whether a defined contribution (DC) scheme or a sister DB scheme.
Increasingly, Trustees and sponsors are looking to have conversations about surplus early, particularly in light of the new options available from the Pension Schemes Act 2026.
Amber Patel, Consultant at LCP, commented: “The key is not to wait until the numbers are known. Agreeing the principles early gives trustees and sponsors a better chance of reaching an outcome that is fair, practical and able to stand up to scrutiny from both members and the Regulator.”
Kenneth Hardman, Partner at LCP, added: “We expect that the additional flexibilities introduced in the Pension Schemes Act 2026 may affect some of the choices available to trustees. Different options may be available before and after scheme wind-up, so care will be needed over both the process and timing.
We are beginning to see more schemes undertake additional analysis before triggering wind-up, helping trustees and sponsors navigate these issues and begin discussions at an earlier stage.”
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