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Is your DB scheme an asset rather than a liability?

Could the tide be turning for DB schemes? Alistair Russell-Smith from Spence and Partners takes a look at the latest developments and shares some top tips.


For years, charities have seen Defined Benefit (DB) schemes as a liability with unexpected costs and risks surfacing. But recent developments mean DB schemes may now be an asset for some charities.

These developments include:




1) Rising yields

Yields have risen over 2% pa in the last 2 years shrinking liabilities by 40% and improving funding levels.

Scheme shrinkage has reduced risk for employers, and improved funding levels have generated surpluses.


The 2023 PPF Purple Book[1] shows that for the first time, UK DB schemes in aggregate are in surplus on an insurance buy-out basis to the tune of £150bn. 63% of schemes are fully funded on a buy-out basis.


2) Barriers to accessing surplus are lowering

Jeremy Hunt’s 'Mansion House' reforms have led to government initiatives to ease access to DB surpluses.

Tax charges on surplus refunds reduced by 10% (from 35% to 25%) in April 2024. Tax charges remain nil for charities. A DWP consultation is in progress[2] considering a statutory override to both ensure surplus is accessible and to lower the bar at which a refund of surplus becomes viable.

3) DB scheme consolidators taking off

The commercial DB consolidator Clara has now completed 2 transactions (Sears and Debenhams). The PPF is expected to launch a public sector consolidator from 2026.

This opens up alternative, and potentially lower cost settlement options for charities than insurance buy-out, particularly for those with smaller DB schemes that could access the public sector consolidator.


Top tips for charities

The changing dynamics of the DB pensions market means charities should review their DB strategy, and assess if there are ways to access value from their DB schemes.

Top tips include:

  • Consider running on your DB scheme to access surplus. Analysis[3] we’ve carried out shows a scheme fully funded on a “low dependency” basis could pass 15% of its assets back to the sponsoring charity by running on for 15 years rather than transferring it to an insurer as soon as possible. This could be a particularly good fit for charities with larger balance sheets that are already managing other financial risks and investment portfolios. Our 2024 Charity DB Benchmarking Report[4] shows surplus refunds could average 12% of unrestricted charity reserves or 8% of unrestricted annual income.

  • Consider triggering an exit from Local Government Pension Schemes (LGPS). If you participate in LGPS, consider exiting to access an exit credit back from the scheme. We’ve seen funding levels rise by over 40% in the last three years in these schemes, and many employers are in surplus on a cessation basis. We helped one charity obtain an exit credit of over £2m from an LGPS fund in 2023.

  • Charities with smaller DB schemes should monitor developments with the PPF’s public sector consolidator[5]. This is intended to be live from 2026 and could be lower cost than insurance buy-out. Smaller schemes can struggle to access the insurance market and have disproportionate running costs. A public sector consolidator would be a welcome respite for charities with these schemes.

  • Review your DB governance and operating model to reduce running costs. Deficit contributions have ceased in many cases. Reducing running costs is the next area to address. This gets your scheme to buy-out quicker if that is your endgame, or generates more surplus if you intend to run on. Left unchecked, running costs can escalate. Our 2024 Charity DB Benchmarking Report shows running costs average £450,000pa. Consider using technology and automation to reduce costs, shrinking trustee boards, or using ‘multi-trust’ solutions being developed by some advisers and trustee firms. These solutions reduce costs by accessing economies of scale from a standardised approach across a book of DB schemes. We’ve seen costs reduce by 30% in some cases.




[2] Options for Defined Benefit schemes - GOV.UK (

[3] Is your DB scheme an asset rather than a liability? (




Find out more about the inaugural Spence Charity DB Pension Report

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