Defined benefit (DB) pension schemes have shown no general agreement on the method of distributing scheme surpluses, a poll from a recent Aon conference series has revealed.

The ability for trustees of well-funded DB schemes to modify rules to share surplus funds with sponsoring employers, subject to safeguards, was first announced in the Pension Schemes Bill.

The polling of nearly 500 delegates from five locations revealed a range of views, with respondents able to select multiple answers from 13 options.

Around 36 per cent favoured topping up defined contribution (DC) pots, while 34 per cent were interested in offering cash lump sums, reflecting the additional flexibility expected from the government.

A similar proportion (33 per cent) supported granting discretionary pension increases to all members, although one in five (21 per cent) preferred targeting those increases at members with pre-1997 benefits.

Meanwhile, 24 per cent said they would prioritise reviewing benefit structures to direct surplus towards members who had received the least generous benefits, and the same proportion highlighted the option of enhancing member support or improving retirement options and terms.

Commenting on the results, Aon partner, Paul Heaney, explained that the range of views reflected both the different situations of schemes and their acceptance, and was adjustable to the new rules introduced in the Pension Schemes Bill.

Heaney explained that the most popular options in the poll, “show that the new rules on allowing cash lump sums primarily to pensioners have a broad appeal and a DC contribution could complement this to achieve something comparable for non-pensioners”.

He continued: “Many schemes do not provide inflationary increases on pensions built up prior to April 1997 - and using surplus to provide some protection to members with these benefits is highly topical.

"However, the polling suggests that more delegates would look at the full benefit structure first in order to consider which groups were worst off, before landing on a pre-1997 pension increase.”

Aon head of member distributions, Nick Coates, added that it was important to remember the most popular approaches from the poll "aren't necessarily mutually exclusive", and that Aon was working with schemes and trustees looking to use multiple options in their approach “as a way of targeting value at different demographic groups within their schemes”.

“Ultimately, there's no single right answer – which means the way trustees consider the issue will be important,” he continued.

“They need to analyse the impact of the options across distinct groups of members and then take a decision from a position of clear information.”

By allowing surplus extraction, the government would like to unlock some of the £160bn surplus funds for reinvestment across the UK economy and boost business productivity.

However, in February, peers in the House of Lords raised concerns about member protections and trustee independence, but the government maintained that existing fiduciary duties and regulatory oversight provided sufficient guardrails.

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