Although defined benefit (DB) pension surpluses have recently re-emerged at levels not seen for a generation, less than 1 per cent of this has been returned to employers since 2006, research from Punter Southall has revealed.

Drawing on newly analysed HMRC tax data and historical records from the British Library, the report examined the evolution of surplus rules, the tax regime, and the practical barriers that have kept billions locked inside schemes.

The report explained that between 1987 and 2006, schemes were compelled to reduce excessive surpluses to retain full tax approval.

During this period, around £30bn of excess statutory surplus was utilised, equivalent to £67bn today.

However, while the majority (69 per cent) of the surplus value went to employers, and 31 per cent to employees, only £3bn (4 per cent) left schemes as refunds to employers.

Meanwhile, the remaining 96 per cent was retained by schemes and used for contribution holidays or to enhance members’ benefits.

According to the report, the vast majority (95 per cent) of employers’ share of excess surplus was spent on contribution holidays, with only 5 per cent on refunds.

In contrast, the vast majority (89 per cent) of employees’ share of excess surplus was used to provide additional pension benefits, with only 11 per cent spent on contribution holidays.

However, Punter Southall's report noted that whilst accessing surplus remains difficult, changes to DB surplus rules in the Pension Schemes Bill could "unlock significant value".

Indeed, the report noted that although most are still expected to retain buffers above buyout and prioritise member security as reforms take effect, if even half of today’s £100bn of buyout surpluses were eventually paid out, cumulative tax receipts could reach £12.5bn, with potential annual tax revenues exceeding £1bn.

The group pointed out that, given employers have contributed roughly £200bn to address scheme deficits, whilst employer refunds have totalled just £800m, there could be questions about whether today’s surpluses represent a reward or overdue payback.

Punter Southall senior consultant, Matthew Claisse, said: “The debate on surpluses often starts from a false premise. The last time surpluses dominated the agenda, billions were spent, but refunds to employers were rare. Most surplus value stayed within schemes.

"Today’s £100bn surplus looks similar on the surface, but the context is very different: closed schemes, stronger member protections, and looming reforms.

"Our research opens up that story and shows how history can guide better decisions now. It raises important questions about who should benefit – especially given the significant support employers have provided over decades.”

---