Conducted during the spring of this year, the survey covered 350 DB schemes in the UK. Key findings include:
Among schemes in surplus and intending to run-on, 76% had not yet agreed how to share surplus between employers and members. Among respondents where the position had been agreed, 62% were distributing part of the surplus solely to the employer. A further 17% were distributing part of the surplus to benefit members only, with the remaining 21% sharing distributions of surplus between employers and members.
Among schemes in buyout surplus and intending to buyout, 50% were yet to agree how to share surplus between employers and members. Among respondents where the position had been agreed, around 66% were returning surplus only to the employer, with the remainder sharing this with members or providing surplus to members only.
73% of schemes with a threshold for surplus release were adopting a threshold above the low dependency basis.
11% of schemes distributed some form of surplus to members in 2025.
The most common approach was to grant a discretionary pension increase, with 7% of schemes granting one in 2025, down from 13% in 2024.
James Patten, Partner in the UK Endgame Strategy team, Aon, said: “Despite 57% of schemes being at least fully funded on a buyout basis - and thus generally having a surplus - the majority remain undecided around its use. It therefore seems that there is all to play for as schemes consider the new surplus flexibilities to be introduced next April.
“For schemes in surplus that are intending to run on, and where a decision has been reached, we found the majority intend to distribute part of the surplus solely to the employer. In some cases, this is an interim position of using part of the surplus to finance expenses, ongoing accrual of DB provision, or employer DC contributions. In many cases, we expect this will be reviewed again by sponsors and trustees ahead of the 2027 surplus flexibilities.
“For schemes in surplus, intending to buyout and where a decision has been reached, we again see that the majority intend to return surplus solely to the employer. However, this will often be influenced by scheme rules, with 50% of respondents having rules where the use of surplus on wind-up is ultimately determined by the employer. Next year’s flexibilities are likely to prompt conversations around whether the distribution of some surplus - above that needed for buyout - can be accelerated, rather than waiting for the buyout and wind-up process to play out in full.
“Most schemes are yet to consider a threshold for surplus release. However, where a decision has been reached, it is notable that the vast majority are adopting a threshold generally above the minimum low dependency basis proposed under the new surplus flexibilities. For example, this might involve including a buffer above the low dependency basis in the threshold for surplus release.”
Nick Coates, Head of Member Distributions, Aon, said: “From a member perspective, our survey suggested the use of discretionary pension increases remained the most popular way of distributing surplus to members. But this is likely to change considerably from April 2027 when there is the option of lump sum provision. A key question for some trustees next year, will be whether to provide discretionary pension increases or lump sums as a way of distributing surplus to members. These options will also lead to surplus being shared in radically different ways among members.
“It is also interesting to see that just 7% of respondents had provided such an increase - down from 13% in 2024. Funding levels generally rose over the period, but this change is likely to have been driven by the more benign inflationary environment. The new flexibilities will bring future distributions of surplus to members into sharp focus for many trustees next year, particularly given the expected need to inform members of any lump sum returns of surplus to sponsors.
“A key development since last year’s survey is that among schemes that are running-on and which have decided to share part of the surplus with members, 43% intend to use it to provide independent financial advice. There is growing demand from members for this, and, where it is not offered, there are potential pitfalls where members ‘phone a friend’ - often in the form of artificial intelligence - to inform significant financial decisions.”
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