Historic HMRC data shows decades of locked pension wealth as reforms promise change
20th November 2025 – New research from Punter Southall uncovers how defined benefit (DB) pension surpluses have been treated over the past four decades – and what that means for today’s £100 billion surplus landscape. Drawing on newly analysed HMRC tax data and historical records from the British Library, the report reveals that while surpluses have re-emerged at levels not seen for a generation, less than 1% has been returned to employers since 2006.
These findings are detailed in a new report, Back to the Future: The Return of Defined Benefit Pension Surpluses, which examines the evolution of surplus rules, the tax regime, and the practical barriers that have kept billions locked inside schemes. It highlights how past policy decisions shaped today’s challenges and explores whether reforms in the Pension Schemes Bill 2025 could finally unlock value for employers, members, and the wider economy.
It examines what today’s £100 billion surpluses can teach us by looking back at the last time schemes faced similar conditions. Drawing lessons from decades of policy decisions and tax rules, the report asks: how can history guide trustees and employers in making better decisions now?
Historic insights
The report reveals how surpluses were treated previously. Between 1987 and 2006, schemes were compelled to reduce excessive surpluses to retain full tax approval. Around £30 billion was used during this period (equivalent to £67 billion today), yet only £3 billion (4%) left schemes as refunds to employers. Historically, two-thirds of surplus value was allocated to employers and one-third to members, reflecting long-term contribution ratios.
Since 2006, however, employers have contributed roughly £200 billion to address scheme deficits, whilst employer refunds have totalled just £800 million, raising questions about whether today’s surpluses represent a reward or overdue payback.
Access remains challenging but change is coming
Accessing surpluses remains difficult. Most refunds since 2006 have occurred during scheme wind-ups, once member benefits are fully secured. Trustees must balance funding volatility, legal complexity, and fiduciary duties, and many schemes lack clear mechanisms to share surplus value with members, particularly in closed schemes or those with limited discretionary benefits.
Current rules allow surplus release only if schemes are fully funded on a buyout basis and trustees are satisfied member benefits are secure. While the Pension Schemes Bill 2025 proposes lowering thresholds to a “low dependency” basis and granting trustees new powers to amend scheme rules, most are still expected to retain buffers above buyout and prioritise member security as reforms take effect. Even so, this shift could unlock significant value: if half of today’s £100 billion of buyout surpluses were eventually paid out, cumulative tax receipts could reach £12.5 billion, with potential annual tax revenues exceeding £1 billion.
DB surpluses and corporate strategy
DB surpluses are increasingly relevant for corporate strategy and M&A. While they offer potential financial and strategic value, the actual realisable amounts depend on scheme funding, trustee discretion, and member protection. The report provides trustees and employers with insights into surplus management, helping them understand the evolving landscape and make informed decisions with confidence.
Matthew Claisse, Senior Consultant at Punter Southall and lead author of the report, said: “The debate on surpluses often starts from a false premise. The last time surpluses dominated the agenda, billions were spent, but refunds to employers were rare. Most surplus value stayed within schemes.
Today’s £100 billion surplus looks similar on the surface, but the context is very different: closed schemes, stronger member protections, and looming reforms. Our research opens up that story and shows how history can guide better decisions now. It raises important questions about who should benefit – especially given the significant support employers have provided over decades.”
To download the report, click here: Back to the future – the return of DB pension surpluses
For further information on Punter Southall, visit: https://www.puntersouthall.com
