The incoming Andy Burnham government should prioritise a stable, long-term framework for defined benefit (DB) pensions, with a particular focus on surplus reform, endgame choice and innovation, LCP has said.

As Burnham takes up the role, LCP argued that the Pension Schemes Act had laid important foundations for reform, but greater clarity and consistency would be needed to encourage trustees and sponsors to move from considering new options to implementing them.

In particular, LCP identified the practical delivery of the new DB surplus regime as an immediate priority, following the publication of draft Department for Work and Pensions regulations and a statement from The Pensions Regulator (TPR).

The new regime is expected to come into force in April 2027.

LCP partner and head of endgame innovation, Jonathan Griffith, described the draft regulations as a “major milestone” in translating the government’s policy ambitions into practice.

“For the first time, schemes, sponsors and trustees have a much clearer picture of how surplus sharing could work, albeit we expect actual surplus sharing deals to be more varied beyond what is covered in TPR’s statement," he said.

Griffith noted that LCP was already seeing increasing interest from schemes seeking to use the new flexibilities.

Indeed, a recent poll conducted during an LCP webinar found that 9 in 10 respondents planned to consider releasing surplus under the new regime.

LCP estimated that FTSE 100 companies with UK DB schemes each held an average surplus of approximately £500m.

Griffith said this represented a substantial pool of capital that could potentially be used productively while maintaining strong protections for members.

“The next step must be meaningful engagement with industry, so that reforms are workable in practice and deliver good overall outcomes,” he added.

LCP also called on the government to advance the permanent legislative and regulatory framework for DB superfunds.

The consultancy warned that a substantial part of the Pension Schemes Act was dedicated to formalising the market, although the timetable for draft regulations had recently been pushed back to the first quarter of 2027.

LCP partner and head of DB consolidation, Laura Amin, said it had been disappointing to see the delay, but expected the government to continue progressing the new rules.

“Their focus should be on creating a viable superfund market which works effectively for providers, their investors, trustees and sponsors, and which can deliver attractive solutions for members with suitable long-term protections in place," she said.

Amin noted that at least three new superfunds were seeking assessment during 2026 and said LCP expected more providers to be operating from next year.

“This will mean greater competition, with increased choice for trustees and sponsors as they consider the best long-term solution for their schemes,” she added.

However, LCP stressed that policymakers should support choice and innovation across the whole DB endgame market rather than favouring a single destination.

Alongside surplus sharing, run-on and superfund consolidation, it stated the bulk annuity market remained a highly successful part of the UK pension system and would continue to be the preferred endgame option for many schemes.

LCP partner in its pension risk transfer team, Charlie Finch, said the Pension Schemes Act had established the foundations for greater innovation through surplus sharing and a permanent superfund regime.

“The priority now must be implementing these reforms in a practical way to give trustees and sponsors a range of viable endgame options," he added.

Finch also welcomed wider innovation in the market, including the 'sponsor swap' transaction through which Stagecoach transferred sponsorship of its £1.2bn pension scheme to Aberdeen.

He acknowledged the recent ministerial statement supporting such innovation had been encouraging, but urged regulators to strike an appropriate balance between facilitating new approaches and maintaining protections for members.

“At the same time, policymakers need to recognise the enormous success of the UK buy-in market, with the insurance regime providing robust long-term security at highly competitive pricing for schemes of all sizes,” Finch continued.

“This will continue to be the endgame solution of choice for many schemes.”

He argued that the government should create a stable policy environment in which insurance, superfunds, run-on and other emerging strategies could operate alongside one another.

Finch added that achieving this balance would be necessary to unlock the potential of more than £1trn of DB pension assets and develop an innovative and competitive endgame market.

More broadly, LCP urged ministers to focus on policy certainty, sequencing and meaningful consultation, given the number of major decisions and implementation programmes facing trustees and sponsors.

LCP partner and head of pensions developments, Jon Forsyth, noted the industry was managing a particularly extensive programme of change.

“There is a huge amount on trustees’ and sponsors’ agendas, and some very important strategic decisions for them to make and changes to implement,” he said.

“There are great opportunities to improve things for schemes, members and sponsors, and we very much support the government pushing ahead with the current reforms,” Forsyth said.

“But it is equally important to take a long-term view when it comes to pensions policy, and to consult meaningfully with industry on any future changes.

“Working towards a more stable, long-term policy framework for pensions should be the name of the game.”

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