Unimaginable only a few years ago, surpluses present trustees with new questions about how these should be spent and invested. Emma stresses the importance of planning early to avoid contention and ensure value can be shared wisely between members and sponsors.
Once funding positions have been stabilised, trustees and companies have the option to invest the remaining surpluses more productively – in equities, infrastructure or sustainable finance – including natural assets such timber.
Emma highlights that alongside DB reform, there is a growing need to address major gaps in provision for the self-employed, who often fall outside the traditional pension system. She calls for innovation and bold policy thinking to engage this under-served group, suggesting now may be a once-in-a-generation opportunity to reshape the entire retirement landscape.
Key points:
• DB scheme surpluses are here to stay due to de-risking and hedging
• Who benefits from the surplus?
• Surpluses offer opportunities for higher-risk, higher-return investments
• A “three-bucket” investment approach: core liabilities, risk buffer, and productive surplus
• Shift in trustee mindset: from de-risking to safe re-risking
• Surpluses may drive renewed interest in run-on strategies over buyout
• Potential for sustainable and UK-focused investment with surplus capital
• Government is encouraging schemes to support UK growth through pensions
• Industry must innovate across DB, DC, CDC — and tackle gaps for the self-employed
• The self-employed are often excluded from pension frameworks and need tailored solutions
• A pivotal “crossroads” moment — a chance to rethink and reform pensions for future generations
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