Industry confidence is building around proposed changes to pension surplus rules, with research from LCP and Simmons & Simmons suggesting many schemes believe the framework strikes the right balance between member protection and flexibility.

A recent poll conducted during a webinar hosted by the two firms found that two-thirds of respondents who had already assessed the incoming surplus regime believed the rules, due to come into force in 2027, were appropriately calibrated.

However, 33 per cent of respondents said they remained unsure, underscoring the need for further regulatory development and guidance from The Pensions Regulator to provide greater clarity ahead of implementation.

The webinar also explored how improvements in funding positions and regulatory changes were creating new opportunities for defined benefit (DB) schemes to use surplus.

When asked how they would prioritise surplus deployment, respondents were split: around 30 per cent said surplus would be used to reduce risks and costs within the DB scheme, while a similar proportion said it would be returned to the sponsor.

Just 14 per cent said their priority would be improving existing DB scheme benefits.

Meanwhile, speakers highlighted three key considerations for trustees and sponsors assessing how to manage and deploy surplus.

These included the fact that opportunities to use surplus existed prior to the planned 2027 rule change, such as improving member outcomes, reducing risk and costs, supporting ongoing pension provision, or returning funds to sponsors.

They also stressed the importance of establishing clear surplus principles and objectives early on, engaging stakeholders, and maintaining a strong understanding of scheme-specific circumstances, including any preconditions for surplus sharing.

Finally, they argued that surplus use should be integrated into wider endgame planning to help deliver the best outcomes for all parties.

Commenting on the findings, LCP head of endgame innovation, Jonathan Griffith, noted that, as most schemes were now in surplus, understanding the growing range of options was "crucial" to achieving the best outcomes and ensuring long-term security.

“The message from the industry is clear: the new surplus rules are landing in the sweet spot - protecting member benefits while giving schemes the flexibility to create value,” he added.

"This marks the beginning of a new phase in which trustees and sponsors can intentionally take smarter, more innovative, and more strategic approaches to surplus use.

Echoing this, Simmons & Simmons partner, Edward Smith, stated that DB scheme surpluses presented “significant opportunities” for both members and sponsors.

“Many clients are designing and implementing strategies that protect hard-won benefit security whilst sharing value,” he said.

“The key from a legal perspective is to understand your pension scheme’s rules, the changing regulatory regime and how to best give effect to your chosen strategy.”

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