Potential changes to surplus extraction rules are giving defined benefit (DB) schemes a "pause for thought," according to Brightwell CEO Morten Nilsson.

Last week, the UK chancellor, Rachel Reeves, announced plans to lift restrictions on how well-funded occupational DB pension schemes can invest their surplus funds, unlocking "billions" of pounds to drive growth and boost pension pots.

Following this, research from mallowstreet, commissioned by Brightwell, has revealed that DB schemes are keeping their options open regarding endgame strategies, despite improved funding levels and the introduction of a new DB Funding Code.

The Endgame & Priorities Report 2025, which surveyed 21 UK DB schemes with over £1bn of AUM and combined assets exceeding £290bn, highlighted the significant impact of regulatory uncertainty on scheme decision-making - particularly around surplus extraction rules.

The research found that 81 per cent of DB schemes have revisited their endgame plans in the last one or two years.

Over a third (38 per cent) plan to run on, 24 per cent plan to buyout, and 38 per cent have not decided on their endgame.

However, half of undecided schemes and 40 per cent of those targeting buyout would consider run on if the government made it more attractive, and 86 percent of schemes believe the government should ease surplus access.

Nilsson claimed that changes to surplus extraction rules would introduce new incentives for trustees and sponsors to run on schemes.

With this in mind, Brightwell's report urged DB schemes to assess their surplus sharing rules carefully before deciding on buyout, run on, or de-risking.

The report said that when revisiting these rules, it was essential to balance the interests and needs of the members with those of the sponsor.

It also suggested revisiting endgame plans to ensure they are still fit for purpose and give alternatives proper consideration.

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