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20 / 05 / 2026
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A defining moment for DB pensions
Morten Nilsson, CEO, Brightwell
The Pensions Regulator’s (TPR) Annual Funding Statement published earlier this month confirms what many have sensed for some time: the UK defined benefit pensions sector has entered into a new era. For the majority, the discussion around the Trustee Board table is no longer dominated by deficit recovery plans but what to do with surplus and how to navigate endgame planning.
TPR estimates that 90% of schemes are in surplus on a technical provisions (TPs) basis, 80% of schemes are in surplus on a TPR-derived low dependency basis, with 60% of schemes funded at more than 110% on this basis, 60% of schemes are in surplus on a buy-out basis. Aggregate figures always hide individual scheme differences, and TPR is explicit that funding positions vary significantly and that macro uncertainty still matters. But taken together, the message is unmistakable: for most schemes, the centre of gravity has shifted from repair to choice.
That shift has happened quickly. In our recent discussion on the Brightwell Pensions Unpacked podcast, one panellist described it as schemes “going to bed with deficits and waking up with surpluses”. The speed matters because it changes behaviour.
Had funding improved slowly, many schemes would simply have continued on the well-trodden path to buy-out without necessarily fully exploring the other options open to them and making a considered choice. The sudden change has forced trustees and sponsors to confront a harder question: what endgame is right for this scheme now that it has genuine optionality?
While the vast majority of smaller schemes, and those with weaker covenants, will likely choose to buy-out, larger schemes appear to be favouring run-on. Our Endgames & Surplus report with mallowstreet found that run-on has decisively overtaken buy-out as the dominant endgame for the largest schemes, with 70% now targeting run-on.
But while run‑on is becoming the dominant strategic direction, uncertainty remains around surplus release. Our research found that only a minority of schemes are currently in a position to release surplus, with many still undecided. The reasons are consistent and telling: over half of schemes cite fairness between cohorts of members, agreement on how surplus should be used, and the risk of future underfunding as their primary concerns.
This reinforces a central point: the industry has moved quickly into surplus, but it is moving much more deliberately in deciding what to do with it.
TPR flags that new legislation on surplus release is now in place, with regulations to follow and further regulator views and guidance expected ahead of implementation. That sequencing is important: the law may open the door, but trustees will still need defensible decisions, robust governance and a clear articulation of fairness.
And while improved funding changes the landscape, it does not eliminate risk, it reshapes it. TPR continues to stress that trustees must understand risks to both investment strategy and employer covenant, particularly given economic and geopolitical uncertainty. The podcast discussion echoed this: funding risk hasn’t disappeared; it remains a factor that can derail strategy and influence whether surplus can be released safely. What has changed is the set of risks rising up the agenda for schemes expecting to exist for longer: cyber risk, operational resilience, and long-term uncertainties that are harder to hedge neatly.
That is why I believe working in partnership is key in this new era. For schemes that plan to run on and potentially release surplus, the next phase will demand judgement, deep expertise and repeatable decision-making frameworks.
One thing is clear, standing still is no longer an option and those decisions that were once theoretical are now distinctly real.
If you’d like to know more about Brightwell, get in touch at: hello@brightwellpensions.com
