More than nine in 10 (92 per cent) pension professionals expect to release defined benefit (DB) scheme surplus using the government’s new flexibilities, a poll from LCP has found.

The poll, conducted during an LCP webinar on the Department for Work and Pensions’ (DWP) draft regulations on DB surplus release, found that 29 per cent said they would release surplus as a single payment, while 63 per cent said they would do so in instalments.

Only 8 per cent of respondents said they had no intention of releasing surplus under the new flexibilities.

This follows on from a recent snap poll from XPS Group, which found that just 58 per cent of pension professionals intended to adopt the new surplus flexibilities.

Meanwhile, attendees were also asked which funding measure would be most appropriate when reviewing the amount of surplus to release.

The poll found that 56 per cent would be comfortable releasing surplus linked to the buyout measure, while 44 per cent favoured low dependency.

However, LCP said the majority of attendees indicated that they would expect a buffer above their chosen measure.

With this in mind, the webinar highlighted several practical considerations for schemes, including the need to build surplus planning into endgame strategy from the outset and define what a 'safe' level of surplus release looks like, both on a best-estimate basis and under downside scenarios.

LCP stressed that schemes should also recognise that surplus release is rarely a one-off event and is more likely to be a managed programme requiring clear planning, strong governance, and a robust monitoring and contingency framework.

The consultancy also highlighted the importance of understanding covenant implications, as releasing surplus increases the likelihood of future reliance on the employer for support.

It warned that schemes will need to ensure decision making can withstand scrutiny through clear responsibilities, independent advice, and a well-documented audit trail.

LCP partner and head of endgame innovation, Jonathan Griffith, said: “The direction of travel is clear: most respondents expect surplus release to become part of their pensions toolkit.

“Schemes will need the right governance and appropriate decision-making frameworks in place in order to make the most of the available opportunities whilst protecting members and avoiding problems down the line.”

LCP covenant partner, Helen Abbott, added that surplus release could unlock value for both employers and members, but warned that it needs to be carefully managed.

“Strong contingency planning, including covenant monitoring, and triggers for action if things don’t go to plan are vital," she said.

“The guidance from TPR emphasises the role contingent assets can have in underwriting risk, and we have seen this be a key feature in surplus release discussions so far.”

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