UK pension schemes are at a crossroads as surplus distribution challenges dominate decision-making, according to new research from PwC.
Four out of five defined benefit (DB) pension schemes are open to surplus distribution, but views on how and when to do so are still developing, the consultancy giant reported in its 2025 UK Pension Funding Strategy Survey.
The research, based on responses from schemes with assets totalling more than £100bn, revealed a sector reassessing long-term objectives and grappling with the practicalities of surplus distribution and data management.
Published today (17 December), the analysis found that surplus distribution had emerged as a key issue following the Pension Schemes Bill’s proposal to ease surplus release to employers and members.
“Practical concerns… are coming to the fore for trustees and sponsors. As the situation evolves, schemes must adopt strategic plans characterised by flexibility and forward-thinking.”
Saye Mkangama, PwC
PwC found that 40% of schemes believe discretionary pension increases are the preferred method for sharing benefits with members, while 29% of respondents remained uncertain.
Flexibility required ahead of law change
Saye Mkangama, pensions funding and investment partner at PwC, said: “This year’s survey highlights a sector facing considerable transformation.
“Although regulatory changes and the introduction of the DB Funding Code are shaping the environment, it is practical concerns, particularly around managing surplus and ensuring data readiness, that are coming to the fore for trustees and sponsors. As the situation evolves, schemes must adopt strategic plans characterised by both flexibility and forward-thinking.”
He added that the findings emphasised the need for effective data management, as well as having a well-defined strategy and the ability to respond to change.
Mkangama added: “With regulations in a state of transition and operational pressures intensifying, UK pension schemes are required to show both resilience and the capacity to adapt.”
Lawyers have told Pensions Expert that they expect preparation for surplus release rules to dominate next year for DB pension schemes, ahead of the Pension Schemes Bill receiving Royal Assent.
Legal outlook: Surplus sharing, guided retirement, and court cases to watch
After a whirlwind year of legislative change, with multiple major bills and other policy and regulatory developments, Pensions Expert quizzes lawyers to find out what they expect to be the key issues that trustees and pension professionals should look out for in 2026. Read the full outlook.
Endgames and journey planning
PwC reported that insurance buyout remained the most popular long-term target for DB pension schemes, but more than a quarter (28%) were planning to run on. Around one in five schemes said they remained undecided about their ultimate destination.
The analysis found that data readiness and administrator capacity remained the top operational challenges, as cited by 21% of schemes.
Few schemes currently meet the Pensions Regulator’s new ‘look-through’ criteria for guarantees, PwC found, with only a third of those with guarantees considering amendments.
