There’s positive news this month for members of UK DB pension schemes… and the substantial surplus recorded has spurred discussions regarding how these funds can be used, and who could benefit.

New analysis from XPS Group shows that UK DB pension schemes maintained strong funding positions throughout November 2025, relative to long-term targets. Schemes held £1,215bn in assets (against £963bn in liabilities) marking only a slight month-on-month dip in funding levels.

That has helped the longer-term outlook significantly: XPS Group are estimating aggregate surpluses of £252bn on long-term targets, up from £187bn the year prior.

So how will the Autumn Budget affect this?

The strong funding levels of many UK pension schemes were maintained through November in the lead up to the Autumn Budget, when the Chancellor unveiled greater flexibilities taking effect from April 2027 with one-off payments to members from pension scheme surpluses no longer being treated as “unauthorised”.

This reform gives trustees and employers further options to use surplus funds, and may allow members to share more directly in the benefits of stronger scheme funding.

XPS analysis and government consultations suggest several ways in which the surplus could be utilized:

• • Refunds to Employer: A cash refund to the sponsoring employer, subject to a 25% tax (down from 35% in April 2024).
  • Member Benefits: Providing discretionary benefit increases or enhancements to scheme members.
  • Investment/Subsidies: Subsidizing defined contribution (DC) costs, improving funding for other DB schemes, or reinvesting into business operations.

Graham Robinson, Senior Consultant at XPS Group added a note of caution, saying: “With the continued high funding levels within DB pension schemes, the enhanced flexibility around surplus distribution announced in the recent Budget is welcome news to trustees and members alike.

“However, careful consideration of all stakeholders will be required when considering any surplus distribution from well-funded schemes.”

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