Pensions Industry Split Over Priority for Defined Benefit Surpluses – Sponsors or Members – LCP Sep 2023

Divisions in the pensions industry over whom should benefit from DB pension schemes surpluses became apparent during a webinar organised by consultants LCP,  the latter said in a statement. By a narrow margin, the largest group of the 200 participants (37.5%) felt  companies who had set up a scheme in the first place and provided most of the funding should be the ones to benefit most from any upside. 

But there was also strong support (30.5%) for DB members to see some upside – perhaps from discretionary benefit increases – and for also (29.7%) for the DC generation to benefit from released surpluses. This option is known to be a major priority for Pensions Minister Laura Trott.

The webinar focused on the DWP’s recently closed consultations on options for DB funding reform. Commons Work and Pensions Committee chairman, Stephens Timms said his committee was concerned whether DB funding rules did enough to allow remaining open schemes to stay open and continue to invest for growth.

And following last year LDI ( liability driven investment ) crisis, the committee was also ” interested to know if new systemic risks could arise if large sums were transferred from DB pension schemes to the buyout market and then invested in a relatively narrow range of assets”, he said

The event focused on the different ways in which the P PF could be used to support more productive and higher return investments by DB schemes. 

These ranged from LCP’s own proposal  which focuses on the largest and best-funded schemes, to the idea of consolidating large numbers of small schemes, advocated by the PPF itself. There was also discussion of the ‘Tony Blair Institute’ proposal for much larger scale consultation into the PPF and other large-scale consolidators.

LCP partner David Fairs commented “It is clear that there is plenty of potential to benefit a wide range of stakeholders if DB surpluses can be grown and shared. If member benefits can be protected in the way we have suggested, the biggest and best DB schemes would be freed up to generate bigger surpluses. There is clearly an appetite for those surpluses to do good across both the sponsoring employers and existing DB members but also to enhance provision for future generations of retirees.”


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