UK DB pension schemes: a £120bn “engine for growth” for the UK?

TPR has today released new analysis of the projected evolution of the UK’s £1.1tn universe of private sector defined benefit pension schemes over the next 10 years.

The headline figure is that “surpluses of £120bn could be accessed in full” over 10 years through a combination of schemes choosing to buy-out or run-on. These figures re-iterate “the size of the prize” - there had been some focus on DWP’s June 2025 impact assessment for the 2025 Pension Schemes Bill, which estimated just an £11bn impact.

This analysis comes at a time when many DB schemes are weighing up their options: an established insurance risk transfer market, an establishing superfund market, run-on and generate surplus using new flexibilities introduced by the 2025 Pensions Schemes Bill, or “wait and see”.

TPR’s modelling explores six potential scenarios, and their impact on a range of factors including: how the £1.1tn of DB pension assets is invested, how much is released to scheme sponsors, how much is spent on improving member benefits, and impact on the gilt market.

TPR’s new analysis models “scheme by scheme” potential decisions made, based on scheme context (funding level, size, maturity, investment strategy, whether it has a US parent company, whether it is still open etc). A number of assumptions are also then made about how schemes invest and distribute surpluses.

Under TPR’s central scenario, a total of £120bn of surplus assets are projected to be released or available to provide additional member pension benefits over the next 10 years. This assumes half of schemes above £250m transact with either an insurer or a consolidator, and half of schemes run-on and release ongoing surplus under the new surplus release flexibilities that come into effect in 2027.

The surpluses will generate significant tax receipts for the Treasury if released back to sponsoring companies. Based on a 25% tax charge this equates to £15bn of tax revenue to the Treasury under TPR’s assumptions, mostly between 2027-2030.

However, the likely tax take is more complicated than that – eg some companies may use surplus in ways that don’t attract tax (eg funding new pension benefits). Further tax receipts will be generated by surplus being used to uplift member pensions as the higher pensions will be subject to income tax. Overall, TPR’s analysis makes clear the potential benefits to the Treasury from well-funded DB schemes are considerable.

Commenting, LCP Partner Steve Hodder said: “It is great to see forward-thinking analysis from TPR on the £1tn+ question of what happens to UK DB schemes. TPR has modelled a range of scenarios reflecting the future uncertainty but they all forecast significant pension surpluses boosting the UK economy over the next decade.

“We’ve long advocated that the UK’s £1tn+ of DB schemes can present a win-win-win for members, sponsors and the wider UK economy. These figures confirm that potential.

“It’s eye-opening that TPR’s analysis shows a £50bn windfall of surplus release over just a three period between 2027-2030, when the new surplus release rules kick in. Whilst it remains to be seen if the industry indeed moves at that pace, this would present a “£10bn+ win” for the Chancellor, potentially within this Parliament.”