Is the greater good no longer good enough?

I spend much of my time engaging with pension scheme trustees and their corporate sponsors. Lately, one reaction has caught me off guard: the surprisingly muted, if not outright negative, response to the upcoming 2025 Pension Schemes Bill.

This reaction has been both surprising and disappointing. The Bill introduces a statutory power allowing trustees of defined benefit (DB) pension schemes to amend scheme rules and distribute surplus funds, either to improve member benefits or reimburse sponsoring employers who have historically funded these surpluses, or both. In a time of persistent inflation and constrained public and private investment, this should be a cause for celebration.

A £1 Trillion Opportunity
The UK’s DB pension schemes collectively manage over £1.4 trillion in assets. Many are now in surplus, with the Purple Book 2024 reporting that 39% of the largest schemes are fully funded on a buy-out basis. The potential release of even a fraction of these surpluses could unlock tens of billions of pounds annually for reinvestment into businesses, infrastructure, and innovation.

This is not just a financial opportunity; it’s a national one. The UK has suffered from chronic underinvestment in infrastructure and R&D. According to the OECD, the UK ranks below the G7 average in both public investment and business R&D intensity. Redirecting pension capital could help reverse this trend and restore global competitiveness.

So Why the Resistance?
Despite the potential, many trustees and sponsors remain hesitant. The most common objections fall into three categories: complexity, risk, and worthwhileness. Let’s address each.

1. Complexity - Yes, the regulatory landscape is evolving. But the core responsibilities of trustees—fiduciary duty, prudent investment, and member protection—remain unchanged. The UK pensions industry is among the most sophisticated in the world, with deep actuarial, legal, and investment expertise. The notion that we are incapable of navigating these changes underestimates the talent and professionalism of the sector.
   Moreover, the Bill provides a statutory override to amend scheme rules, simplifying what was previously a legal minefield. This is a pragmatic step forward, not a bureaucratic burden.
2. Risk - Let’s be clear: no one is advocating reckless risk-taking. But the current orthodoxy—de-risking through bulk annuities—often results in value destruction. Pension schemes are selling assets at discounts to their market value, simply to get deals done at any cost, because there is surplus to spare. In 2024/25 alone, bulk annuity volumes approached £48 billion, with record deal activity.  But given their regulatory status, pension schemes have much greater flexibility to invest productively than more heavily regulated insurers.
   Today, secure investments with cashflow-matching characteristics are yielding over 10% per annum—a level not seen in decades. Even modest allocations to such assets could generate tens of billions in additional value annually. The real risk lies in inaction—in forfeiting long-term value creation for short-term certainty.
3. Worthwhileness - This is perhaps the most frustrating objection. I’ve heard trustees and mid-level executives dismiss hundreds of millions in potential upside as “not worthwhile” because “we’re not in the business of running pensions.”
   But we are. And we must be. Over the next 30 years, the vast majority of DB assets will be paid out. The time to act is now. We missed the opportunity to create a sovereign wealth fund from North Sea oil. Let’s not miss the chance to do so with the pension wealth of the baby boomer generation.
   This is a once-in-a-generation opportunity to reshape the UK’s economic future. The Government has taken a bold step. Now it’s up to fiduciaries to match that ambition.

Conclusion: The greater good still matters
The 2025 Pension Schemes Bill is not perfect. Many details—particularly around surplus use and member protections—are still to be clarified. But the direction is right. It empowers trustees and sponsors to pursue strategies that preserve value, reward stakeholders, and contribute to broader societal benefit. The greater good is still good enough. In fact, it’s essential.