More than four in five (86 per cent) defined benefit (DB) schemes are currently running at a surplus, though 36 per cent said they "need advice" on how to use it, according to research from LawDeb.

The research, conducted among 150 finance decision makers in UK companies with DB pension schemes, also revealed that 76 per cent of smaller schemes, with assets valued between £100m-£249m, reported running at a surplus, with this number rising for schemes between £250m-£499m (90 per cent) and £500m-£999m (93 per cent).

It follows news that DB funding levels have hit a record high, with the Department for Work and Pensions (DWP) highlighting that the number of DB schemes sufficiently financed had tripled since 2010.

In light of recent improvements, the government had previously announced plans to unlock surplus funds in UK private-sector DB pension schemes, subject to agreement from scheme trustees.

These changes will form part of a package of reforms in the upcoming Pension Schemes Bill, which is expected to be shared before the summer recess.

Despite many schemes remaining unsure of their surplus plans, a third (33 per cent) said they intended to pay the surplus into the business or invest it in the firm.

Indeed, LawDeb said the outlook appeared "positive" for firms with surplus schemes and plans to buy-in, buy out, or consolidate.

Sixty-nine per cent said they planned to pay the surplus to the company, while just over three-fifths of firms (61 per cent) intended to use it to increase member benefits, and over half (56 per cent) planned to share it between members and the sponsor.

The survey also revealed a reluctance from schemes to run on, with three-fourths of the respondents' schemes (76 per cent) not currently planning to do so.

The main factor influencing this decision was that the cost of advice was too expensive (41 per cent), followed by too much investment risk (36 per cent)

LawDeb managing director, Sankar Mahalingham, noted that while most DB schemes reported a surplus, many firms were undecided about how best to use it for their business and the members of the schemes they sponsored.

"The ultimate decision may well not rest with the business," she suggested, "depending on the trust deed and rules, and employers need to engage with the trustees early to understand their views."

Mahalingham acknowledged that while surplus was not a "novel concept" within the pensions industry, harnessing it to its full potential could prove tricky.

"This becomes even more concrete with the government's potential pensions reforms to utilise these funds to support economic growth - while still protecting members' benefits," she added.

Mahalingham argued that these challenges called for an independent trustee who could work alongside firms towards making the best decisions, both for the business and for members, rather than companies not engaging in considering which routes would be most beneficial, and potentially missing out as a result.

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