FTSE 100 schemes hold large surplus
The aggregate surplus of FTSE 100 defined benefit (DB) pension schemes was around £55bn at the end of June 2026, according to LCP’s Pensions Explorer.
The schemes had an estimated accounting funding level of 120 per cent as at 30 June, leaving trustees and sponsors with greater scope to consider a broader range of long-term endgame strategies. This raised funding level provides a cushion against potential market fluctuations, allowing schemes to explore various options for managing their assets and liabilities.
LCP noted that the aggregate position had remained broadly stable since the end of June despite political developments and wider global uncertainty. Market movements on Andy Burnham’s first day as Prime Minister changed the estimated surplus by less than £1bn, it added. The relative stability of the surplus in the face of significant political change shows the resilience of the pension schemes and their ability to weather short-term market volatility.
Endgame Choices Grow
The consultancy argued that the strength of current funding positions meant surpluses were increasingly becoming a strategic consideration rather than solely a measure of scheme security. As a result, trustees and sponsors are now able to consider a range of options for managing their schemes, from insurance buy-in and buyout to superfund consolidation and other emerging arrangements.
This came as the market for alternative DB endgame solutions continued to develop during the second quarter of the year. The growth of this market is driven by the increasing demand for flexible and innovative solutions that can help schemes achieve their long-term objectives.
In April, Clara completed its fifth superfund transaction, with around 500 members and £43m of assets transferring from the Videndum pension scheme. This transaction is notable not only for its size but also for the use of a new open-section structure, which is designed to make superfund consolidation more accessible to smaller schemes.
Developing Market
The deal was Clara’s smallest transaction to date and used a new open-section structure intended to make superfund consolidation more accessible to smaller schemes. This development is significant, as it suggests that the market for alternative DB endgame solutions is becoming more inclusive and able to cater to a broader range of schemes.
LCP said the transaction demonstrated how the range of potential endgame options was broadening beyond the largest pension schemes. This included insurance buy-in and buyout, continued run-on, superfund consolidation and other emerging arrangements designed to meet different scheme and sponsor objectives. The increasing diversity of endgame options available to schemes is likely to lead to more tailored and effective solutions, as trustees and sponsors are able to choose the approach that best fits their specific needs and goals.
As the market continues to evolve, it’s likely that we’ll see more schemes exploring these alternative options, potentially leading to a shift in the way DB pension schemes are managed in the long term. The growth of the market for alternative DB endgame solutions is also likely to drive innovation, as providers compete to offer the most effective and efficient solutions.
Policy developments were also expected to provide well-funded schemes with greater flexibility. The Pension Schemes Act 2026, which received Royal Assent in April, is a key piece of legislation that is likely to shape the future of DB pension schemes. The government has also launched a consultation on regulations that could broaden the circumstances in which DB surpluses may be used, which is expected to take effect in April 2027.
