DB pension surpluses must be viewed as strategic assets, says Hughes Price Walker

Hughes Price Walker said trustees should see defined benefit (DB) pension surpluses as strategic assets, not just chances for surplus release. 

The firm pointed out that with changes to the surplus regime being considered, including the Department for Work and Pensions’ consultation on new surplus flexibilities, trustees need to think about how any surplus fits into the scheme’s wider funding and endgame plan.

Ray Hughes (pictured), director at Hughes Price Walker, said: “Improved funding positions are a positive development for many DB schemes, and the ability to consider surplus release creates new opportunities for schemes and sponsoring employers. 

“However, surplus should not simply be viewed as capital available for distribution. 

“The key question is how surplus fits within a scheme’s broader funding and risk management strategy, and whether retaining, sharing or releasing it best supports the long-term interests of both the scheme and its members.”

Hughes added: “One of the biggest challenges will be balancing the interests of different stakeholders. 

“While employers may have an interest in benefiting from surplus, trustees must continue to act in accordance with their fiduciary duties and consider whether members should also benefit from any surplus position.

“Ultimately, the question is not simply whether surplus can be released, but how it fits within the wider strategy for the scheme.”