ACA Chair, Stewart Hastie: “The Regulator’s annual funding statement continues to show the growth in healthy pension scheme funding levels with some 80% of the 5,000 UK defined benefit schemes now estimated to be fully funded on a low risk, low dependency basis. Only 10% are estimated to have a shortfall on a cash funding (or technical provisions) basis. It is a very different landscape to the one in which the Pensions Regulator started over 20 years ago. We support the Regulator’s call for most DB schemes to be considering their endgame options and developing their “surplus policy” – particularly, in light of the new surplus release flexibility coming into effect with the Pensions Schemes Bill recently receiving Royal Assent. The next step on DB surplus is really important and we are seeing an increasing number of schemes looking at running on for several years rather than insuring at the earliest opportunity. Getting the secondary legislation and Regulator guidance just right is critical to supporting trustees and sponsors in taking an approach that reflects the varied characteristics and history specific to their own scheme and associated employer or sponsor. In what can be an emotive subject, it will be important to use appropriate terminology and language to support the right behaviours, recognising the requirement for solvent employers to fund DB schemes prudently meant that DB schemes were always expected to end up in surplus at some point. Interestingly, in this year’s statement, the Regulator starts to differentiate between those schemes that are above 110% low dependency funded (some 60% of 5,000 schemes) and those between 100% and 110% funded (some 20% of schemes) perhaps giving some indication of how it might approach the DB surplus guidance expected towards the end of this year. More imminently, the Regulator has also confirmed that it intends to issue a further statement alongside the DWP’s draft Regs, to provide early views on the issues trustees should consider around surplus release.”
Laura McLaren, Head of DB Scheme Actuary, Hymans Robertson, said: “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.”
Adrian Bourne, Co-Chair of the SPP’s Covenant Committee, said: "The strong funding referenced in TPR’s Annual Funding Statement is more than just a number. With most schemes now in surplus, the shift from recovery to future planning reflects real progress and growing resilience, where employer covenant can continue to play a part in shaping credible, well-supported endgames.” Jon Forsyth, Chair of the SPP’s DB Committee said: “Against this backdrop of improved funding, clarity on emerging areas such as surplus release and endgame options will be essential. Trustees will need to balance new opportunities with appropriate safeguards, ensuring that any decisions taken are aligned with member interests while reflecting the evolving legislative and regulatory landscape.”
TPR Annual Funding Statement 2026
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