Surplus management and sharing is becoming an increasingly popular option for defined benefit (DB) pension schemes, but barriers to reaching endgame remain, according to LCP.

LCP’s latest DB Pensions Priorities report found that schemes were embracing new opportunities across the full range of endgame choices, with run-on solutions gaining in popularity among smaller schemes.

Almost half of the schemes surveyed between £500m and £1bn with an agreed endgame were planning to run on.

More than two thirds (69 per cent) all DB scheme respondents were actively considering surplus management.

LCP noted that while DB scheme funding levels had improved in recent years, not all schemes would be in surplus, and some may have to act to avoid one arising.

However, its report’s findings suggested that these schemes were in the minority, with just 31 per cent of respondents not expecting to manage surplus, falling to 21 per cent for schemes over £500m.

Schemes that were planning to use their DB surplus were not limiting themselves to a single use, with 71 per cent saying they would put surplus to use in at least two ways.

However, 70 per cent of DB schemes were still finding barriers to progressing towards their endgames.

LCP said that while data and benefits readiness remained key issues, differences in stakeholder views were increasingly delaying progress.

The consultancy highlighted a noticeable increase in the number of respondents reporting differences in views between trustees and sponsors as being the primary factor preventing progress.

This could reflect negotiations being reopened, LCP added, with endgame options widening and funding levels improving.

More than half (55 per cent) of schemes were now full buyout funded, up from 43 per cent in 2025.

Of the schemes planning to fully insure benefits, 75 per cent expected to complete their final transaction within five years.

Cyber risk was becoming an increasingly common concern, with nearly three quarters of DB schemes citing cybersecurity and AI-related risks in their top three worries.

The use of AI was beginning to move from theory into practice, although most schemes were in the early stages, with 37 per cent of DB schemes reporting limited or pilot use in specific areas.

Nearly a third (31 per cent) were not using AI and had no plans to do so.

“DB schemes are operating in a very different environment from even a few years ago,” LCP partner and report author, Stefan Kemp, stated.

“Improved funding levels, greater flexibility around surplus and a growing range of endgame options mean trustees and sponsors have more choices than ever before.

"For many, the priority now is not to simply decide on their endgame, but to understand the options and controls they have available as part of that choice, and how these can be used to deliver the best outcomes for members and sponsors."

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