£170bn of potential surplus prompts shift in DB endgame thinking, XPS research finds

£170bn of potential surplus prompts shift in DB endgame thinking, XPS research finds

23 Mar 2026

• Medium to large schemes increasingly pausing buyout to examine running on for surplus
• 41% now exploring run-on compared with 38% targeting buyout as soon as practicable
• Modelling suggests significant long-term value could be generated from safe run-on strategies

New research from XPS Group finds evidence of a marked shift in endgame thinking among medium to large defined benefit pension schemes, with many pausing their journey to buyout and critically examining whether running on either for the long term or as a bridge to buyout could deliver better outcomes for members and employers.

XPS analysis indicates that UK defined benefit schemes could generate up to £170bn of surplus over the next decade, defined as funding above 100% on a buyout basis, in nominal terms. This is almost double XPS’s 2023 estimate of £100bn over the same period, reflecting improved funding levels. This improvement in funding position has opened up new opportunities for trustees and employers, enabling them to explore whether the optimal strategy is to buy out or run on to build and use surplus.

In a survey of medium to large defined benefit schemes, 41% said they are now exploring running on as a potential endgame strategy, compared with 38% targeting buyout as soon as practicable. A further 21% remain undecided. Of those exploring running on, there was a mixture of schemes looking at long-term run-on with ongoing release of surplus, and short to medium term run-on as a form of “delayed buyout”. The findings point to a meaningful reappraisal of traditional endgame pathways.

The shift comes as the Government’s Pension Schemes Bill progresses through Parliament, with Royal Assent expected in Spring 2026, and with surplus regulations and guidance from The Pensions Regulator anticipated by April 2027. Together, these developments are creating an environment where trustees and employers can view DB run-on as a genuinely credible alternative to buyout in the right circumstances. 

XPS’s modelling over a ten-year horizon suggests that, under a range of scenarios, schemes running on with an appropriate investment and risk management framework could generate significant surplus while maintaining a very high probability of being able to pivot to an insurance buyout if required.

Tom Froggett, Head of DB Run-On, said:

“Buyout will remain the right solution for many DB schemes, and often the question will be when, not if they buy out, but more employers and trustees are pausing to consider running on as an option. They are finding that, for a well-funded scheme, in the right circumstances and with appropriate surplus release guardrails, significant value can be delivered for members and employers. The key question is how to deliver that value safely and effectively. Running on like an insurer, with clear capital buffers, not only protects members and facilitates the ability to pivot to insurance if needed, but also delivers more stable and predictable surplus flows for employers.”

The full report, UK DB Surplus: Capturing the opportunity, sets out the survey findings, modelling approach and analysis in detail.

Notes:

Research and modelling

• The £170bn figure represents XPS’s estimate of the potential aggregate surplus that could be generated by UK defined benefit pension schemes over a ten-year period. Surplus is defined as funding above 100% on a buyout basis and is expressed in nominal terms.
• The modelling considers a range of economic and investment scenarios and assumes an appropriate investment and risk management framework for schemes running on. Full probability analysis and scenario detail are set out in the report.
• The survey was conducted among medium to large UK defined benefit schemes. Further information on the survey sample and methodology is available in the report.

Regulatory context

• The Government’s Pension Schemes Bill is currently progressing through Parliament, with Royal Assent expected in Spring 2026. Regulations relating to surplus and updated guidance from The Pensions Regulator are anticipated by April 2027.