TPR has used its new DB universe projection model and the analysis highlights a decisive shift away from deficit management towards endgame planning and surplus management. The main observations from TPR’s analysis are set out below.
1. Increase in schemes able to buy out
As at 31 March 2025, the effective date of the analysis, over half of DB schemes (52%) were in surplus on a buyout basis compared to only 2% in 2016. Over the same period, total buyout surpluses increased from around £2 billion to around £92 billion. TPR expects the number of schemes in surplus on a buyout basis to increase further to approximately 75% of schemes in 2035.
2. DB schemes will remain a significant part of occupational pension scheme market
TPR’s analysis indicates that, despite the expected increase in the number of buyouts, DB schemes will remain a material part of the occupational pensions landscape. The majority of schemes that are expected to buy out are those with assets under management (AUM) with under £100 million. By 2035, AUM in the remaining occupational schemes is projected to be between £0.6 trillion and £0.7 trillion in real terms.
3. Over £200 billion of assets could transfer to the insurance sector
There may be a question of whether the insurance market can meet the demand for buyout. TPR’s analysis suggests that the market does have capacity to take on all schemes that may wish to buy out over the next decade, though some short-term pressures are expected. With estimated annual insurer capacity limits of around 350 schemes and £50 billion of liabilities (in real terms), TPR’s projections show that around 2,400 to 2,600 schemes, representing around £200 billion to £400 billion of assets, could transfer to the insurance sector over the 10-year period.
4. Surplus opportunities
Total buyout surpluses are estimated to reach and exceed £120 billion in real terms over the 10 years to 2035, regardless of whether run-on or buyout are chosen as the endgame option. How and when this surplus is accessed will vary widely, and will depend on factors such as whether to access the surplus annually or wait until buyout and how any surplus will be shared between members and employers. TPR’s discussions with the industry have suggested that around 50% of large schemes are considering running on in the short to medium term in order to access the surplus on an ongoing basis.
5. Superfunds
TPR’s analysis includes a scenario in which the superfund market is considered to be an “attractive and realistic alternative” to buyout. It indicates that over the 10-year period, superfund transactions are expected to reduce the level of buyout transactions by around £10 billion in real terms. TPR has noted that it has not included any allowance for schemes moving to buyout after entering into a superfund arrangement.
6. Reduction in gilt holdings
TPR’s analysis indicates that the level of gilts held by DB schemes is expected to reduce by 35-45% over the 10-year period, from around £570 billion to between £320 billion and £380 billion (in real terms). This assumes that schemes hold around 50% of their assets in gilts, while insurers hold only around 20% of their assets in gilts. The analysis also suggests that the average duration of gilts held by DB schemes is expected to reduce over time, reflecting the maturing of the schemes.
What does this mean for trustees?
TPR’s analysis makes it clear that many DB schemes are entering a new phase, where strong funding positions can create opportunities as well as increase responsibility. Issues that trustees should consider include:
- Revisit long-term strategy: endgame options are increasingly realistic for more schemes, so trustees should ensure there is a clear documented endgame plan reflecting current circumstances instead of historical assumptions.
- Surplus governance: trustees should consider if and when surplus can be accessed, any appropriate buffers to protect member security and how any surplus could be shared between members the employer.
- Joined-up advice: as decisions on which endgame option to adopt are highly inter-dependent, trustees should expect close alignment between actuarial, covenant, investment and legal advice, and they should allow plenty of time for robust decision-making.
Sarah Tune, TPR director of evidence and external risk, said: “The step change in DB funding means trustees and employers must actively consider their endgame strategy. Whether that’s running on, consolidating via a superfund or buying out, the decisions you make today will shape the future for your members.”
Conclusion
TPR’s forward look signals a pivotal decade for DB schemes, with many now able to focus on endgame execution and disciplined surplus management rather than deficit repair. Trustees should refresh strategy, strengthen governance around surplus access and member security and plan early for market capacity constraints.
Helen Chivers, Actuarial Team Leader – Hughes Price Walker
