Pension scheme sponsors were the sole beneficiaries of defined benefit (DB) scheme surplus in around half of reported cases, according to analysis from LCP.

Members were the sole beneficiaries in 14 per cent of cases, while surplus was shared between sponsors and members 36 per cent of the time.

The analysis comes as government reforms under the Pension Schemes Act 2026 are set widen the options available for distributing DB scheme surpluses.

Combined with improved funding levels, the changes are prompting more trustees and sponsors to consider how surpluses should be used as schemes move towards wind-up.

The consultancy said early planning by trustees and sponsors was important to understand the approaches being adopted elsewhere, while also taking account of their own scheme-specific circumstances.

LCP consultant, Amber Patel, said: “The key is not to wait until the numbers are known. Agreeing the principles early gives trustees and sponsors a better chance of reaching an outcome that is fair, practical and able to stand up to scrutiny from both members and the regulator.”

In terms of distribution, a refund to the sponsor was the most common individual outcome, accounting for 43 per cent of cases.

However, in nearly a quarter of cases, sponsors redirected surplus funds into another group pension arrangement, including a defined contribution (DC) scheme or another DB scheme with the same or overlapping membership.

Patel added in an LCP blog that trustees and sponsors were often looking for an outcome that “recognises the interests of multiple parties”.

She continued: “This can create opportunities to reach an outcome that works across a wider workforce, rather than viewing the surplus decision solely through the lens of the scheme being wound up.”

LCP partner, Kenneth Hardman, added: “We expect that the additional flexibilities introduced in the Pension Schemes Act 2026 may affect some of the choices available to trustees.

"Different options may be available before and after scheme wind-up, so care will be needed over both the process and timing.

“We are beginning to see more schemes undertake additional analysis before triggering wind-up, helping trustees and sponsors navigate these issues and begin discussions at an earlier stage.”

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