UK defined benefit (DB) pension schemes are reassessing their long-term objectives as surplus distribution and data readiness emerge as the dominant issues shaping decision-making, according to PwC’s 2025 UK Pension Funding Strategy Survey.

The research, based on responses from schemes with assets totalling more than £100bn, found that 41 per cent of schemes are targeting insurance buyout as their long-term funding goal, while 28 per cent are planning to run-on - an approach more commonly favoured by larger schemes.

Around one in five schemes remain undecided about their endgame, highlighting ongoing uncertainty and the complexity of available options.

Despite regulatory change and operational pressures, the survey suggested most schemes are showing stable or improving funding positions.

However, surplus distribution has moved rapidly up the agenda following proposals in the Pension Schemes Bill to ease the release of surplus to employers and members.

Indeed, four in five schemes said they are open to distributing surplus, although views on how and when to do so are still evolving.

Discretionary pension increases are currently the preferred method for sharing surplus with members, cited by 40 per cent of respondents, while 29 per cent remain unsure, underlining that many schemes are still forming their approach.

PwC pensions funding and investment partner, Saye Mkangama, said the findings pointed to a sector undergoing significant change, with practical challenges increasingly taking precedence over regulatory considerations.

“While regulatory developments such as the DB Funding Code are clearly shaping the landscape, trustees and sponsors are increasingly focused on practical issues - particularly how to manage surplus and ensure data readiness,” Mkangama added.

“Schemes will need strategies that are both flexible and forward-looking if they are to navigate this period of transition effectively.”

Meanwhile, the survey suggested operational pressures remain acute, with data readiness and administrator capacity cited as the top operational challenge by 21 per cent of schemes.

Mkangama argued that the findings highlighted the need for schemes to remain adaptable amid continued change.

“With regulation still evolving and operational demands intensifying, resilience alone is not enough - schemes must also have the agility to respond quickly and decisively,” he warned.

The survey found that the updated DB Funding Code has, so far, had a limited impact on most schemes’ long-term strategies, valuation outcomes or investment approaches.

Most respondents expected to adopt the fast track route, which allows schemes that meet set criteria to avoid additional regulatory scrutiny.

However, around 30 per cent anticipated taking the bespoke route, higher than the 20 per cent expected by The Pensions Regulator (TPR), suggesting a stronger appetite for tailored funding and investment strategies.

PwC employer covenant and restructuring partner, Katie Lightstone, said flexibility is becoming a central theme under the new regime.

“Where schemes are building on an existing strategy or refreshing their long-term plans, discussions between trustees and sponsors are generally constructive,” Lightstone explained.

“However, schemes reshaping their approach to meet fast track parameters often face more complex negotiations, particularly when balancing regulatory expectations - such as expense reserves - with sustainable funding outcomes.”

She added that the new framework is encouraging more substantive discussions around long-term strategy, risk and affordability.

“That is a positive development for members,” Lightstone noted.

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