(21 July 2026 – United Kingdom) Corporate pension sponsors and trustees are vying for control over approximately £160bn in UK pension surpluses when the government is looking at new rules on managing these excess funds.
FT reports corporate defined benefit schemes, valued at £1.1tn according to the Pension Protection Fund (PPF), have recorded an improvement in funding levels since 2019 thanks to rising gilt yields which have enhanced projected investment returns.
The excess funds from UK pension surpluses could be paid out to company shareholders or used to improve benefits for scheme members. The UK government has previously warned pensions are not a “plaything” with moves afoot to redirect large and growing pension savings towards domestic investment to try to kick-start economic growth and redirect capital to sectors such as technology, defence and green energy.
In the two decades to 2017, FTSE100 pension plans were in deficit every year except for one, according to data from LCP, forcing the CFO to find extra funds to cover the deficit each year. This cohort of CFOs is more likely to prioritise removing any pension risks from their company’s balance sheet and may lean towards buyout deals with insurers.
“For smaller pension schemes, or those with weaker covenants, a buyout from an insurer will remain the primary goal and likely best option. For larger schemes the decision is less clear-cut with most large schemes currently planning to run on rather than choose to be bought out by an insurer” commented Brightwell CEO Morten Nilsson.
Mercer analysis based on East & Partners research finds from an investor perspective, there are a number of advantages to DB schemes being better funded:
- Ability to access a scheme’s surplus
- Broader range of investment mandates
- Lower risk of regulatory intervention, particularly for large cap investors
- Lower risk of deal value leakage
- Greater appetite from schemes to partner with PE
- Schemes no longer worried about deficits / less constraints
- Ability to transfer the scheme off balance sheet – to an insurance company
The Mercer UK Private Equity Review found that pension schemes remain essential capital sources for private equity (PE), especially those managing assets above £10 billion. To unlock greater pension fund investment, however, PE firms must prioritise educating trustees on PE’s portfolio benefits.
Download the full Mercer report: Unlocking Value Opportunities from UK Pension Funds