David Walmsley, Director of Trusteeship, Administration and DB Supervision, gave a speech at the DB Strategic Investment Forum entitled 'Securing benefits and investing for growth: the changing nature of defined benefit pensions'.
Introduction
Good morning, I’m David Walmsley, Director of Trusteeship, Administration and DB Supervision at TPR.
I’m very grateful for the invitation to join you today. Not least because I get to spend some time here in the beautiful surroundings of Loch Lomond, but particularly at such a pivotal and dare I say it exciting time for pensions. As the Pension Schemes Bill progresses through the Westminster Parliament, we are being gifted an opportunity to improve a system that delivers a comfortable retirement for all savers.
Now, there is no doubt that we have a challenge ahead of us, but by placing good governance and strong trusteeship at the heart of all we do as an industry, we will be able to create a sustainable and holistic system that serves savers well for the foreseeable future.
While the Bill will introduce important reforms for defined contribution (DC) schemes around value for money and at-retirement decisions, today I will focus on what it would mean for defined benefit (DB) schemes, including considerations around surplus extraction and investment governance.
The interests of the saver will always be paramount for TPR. But we believe that the proposed reforms can, in parallel, serve as a catalyst for broader economic growth. There is no inherent tension between advancing member outcomes and strengthening the economy. The two objectives are interlinked.
This is the context in which my more specific remarks should be considered.
Given the broad nature of the changing defined benefit pensions landscape, I’m going to limit my remarks to a trio of themes.
There will be chance to ask questions afterwards, so if I don’t cover something you’d like to know about or you’d like more information on something I do address. Please feel free to ask me, or my colleague, Katie Suter who is sitting in the audience and leads our DB supervision team.
My three themes today are:
Firstly, that the funding reality for many DB schemes has changed.
Secondly that this means more options are available.
And finally, that trustees must have the highest standards to be able to make the right choice for savers.
So, to start at the beginning ...
1. The new funding reality
For much of the regulator’s history, our focus was on scheme deficits and the risks of short-term planning. Today, the DB landscape has shifted; over 75% of schemes are in surplus on a low dependency basis, totalling £160 billion. Nearly half show surplus even on a buy-out basis, approaching £100 billion.
This transformation opens new strategic options for trustees. While buy-out remains a strong endgame, it’s no longer the only route. Market innovation has introduced diverse financial, governance, and insurance models, each with its own strengths and trade-offs.
Our Annual Funding Statement, DB funding code, and covenant guidance help trustees assess their funding position and navigate this evolving environment. But strong funding must not breed complacency; global risks and economic volatility demand continued vigilance.
We expect around 80% of schemes to meet Fast Track requirements, reducing regulatory burden. Schemes opting for the Bespoke route should engage early with advisers and employers to shape appropriate strategies. Our regulatory focus will be on Bespoke submissions that carry higher risk, assessing:
- long-term objectives
- investment strategy
- technical provisions vs covenant strength, and
- recovery plans, where relevant
We’ll intervene where risks are inappropriate, and our impact is greatest. As we receive the first valuations under the new regime, our approach will evolve over the next few years, becoming more targeted thanks to improved data.
Early collaboration is key. Trustees should begin working with advisers and sponsors now to prepare for valuation submissions.
That’s a little on the new funding reality, let’s turn to:
2. New options
The new funding landscape, supported by the Pensions Bill, offers trustees greater flexibility. A key provision allows amendments to scheme rules to enable surplus returns in appropriate cases.
Previously, surplus could only be released when schemes were fully funded on a buyout basis. Under the new framework, release may be possible at the low dependency funding level; opening new opportunities for trustees and members.
To support this, we’ve published guidance on emerging models, including 'running on', which allows surplus release while continuing scheme operations. With over half of DB schemes fully funded on a buyout basis, trustees should consider long-term objectives and endgame strategies, including surplus use to strengthen covenants or improve member outcomes.
Running on may suit well-funded, well-governed schemes with strong employer covenants. Trustees must weigh risks against potential benefits and ensure any approach is backed by robust governance and clear timescales.
We recommend establishing a surplus policy; developed with employers, inclusive of member views, and informed by legal and covenant advice. Trustees must remain independent and not be pressured by employers; the final decision is theirs.
While legislative reform is pending, current rules apply. Recent determinations offer guidance for schemes in wind-up. We’ll continue engaging with the industry, using our guidance to support strategic planning.
Once legislation is enacted, we’ll consult formally and publish detailed surplus release guidance. These changes mark a shift toward more flexible, responsible pension scheme management focused on long-term member interests.
3. Highest standards
As we look to the future of defined benefit and local government pension schemes, the role of productive finance has emerged as an option.
Partly as schemes consider the value of private assets and also because of the great incentive in growth assets.
Unlocking long-term investment opportunities, whether in infrastructure, housing, or climate transition, requires more than just capital. It demands robust governance and professional decision-making at every level. A level of scale is also required – scale possible to achieve due to the improved funding status of many DB schemes.
Trustees and scheme managers are not simply stewards of legacy assets. They are strategic decision-makers for schemes that often have significant investment clout, operating in a complex environment. With that comes a heightened expectation of professionalism and effective governance. They must be equipped to assess illiquid assets, understand long-term risk-adjusted returns, and evaluate how these investments align with their scheme’s journey plan and covenant strength.
At The Pensions Regulator, we are clear: productive finance must be pursued responsibly. That means trustees and scheme managers must have the right skills, access to high-quality advice, and governance structures that support challenge, transparency, and accountability. This is particularly important in LGPS, where public scrutiny and fiduciary duty intersect.
We are raising the bar on the capabilities of trustees and those responsible for managing pension schemes; not just in technical knowledge, but in strategic thinking and leadership. Whether a scheme is considering investment in renewable energy, social infrastructure, or regional development, trustees and scheme managers must be able to demonstrate that decisions are evidence-based, member-focused, and aligned with long-term objectives.
Productive finance offers real potential to deliver sustainable returns and broader economic value. But it must be underpinned by governance that is rigorous, professional, and fit for purpose. That is the standard we expect, and the standard members deserve.
Governance
The job of trusteeship is becoming more complex because of the new options and expectations I’ve outlined.
We want you to be thinking about what being a modern trustee entails. About ESG and EDI issues, about considering a broader range of investments, and about the contemporary needs to administration, particularly in relation to data and dashboards.
We have changed and will continue to evolve our regulatory approach; both in relation to the pensions landscape and our dealings with you. Our supervisory relationships with trustees are evidence of this.
The Mansion House reforms opened the door to a more ambitious vision for pension investment, one that seeks to unlock capital for productive finance and long-term economic growth. For defined benefit schemes, this presents both opportunity and challenge.
We recognise the potential benefits of diversifying into assets that support UK infrastructure, innovation, and sustainability. But we must also be clear-eyed about the risks. If these assets fail to deliver, the consequences for scheme funding, member outcomes, and employer covenants could be significant.
This is where governance becomes critical. Trustees must not be swayed by momentum or political narrative alone.
Trustees should ensure that each investment is assessed on its own merits, including its expected return, associated risks, income generation potential and liquidity profile.
Every investment decision must also be made in the context of a scheme’s funding position, journey plan, and risk capacity.
Open schemes that have much longer time horizons will have greater flexibility in their investment approach than mature closed schemes that are increasingly focused on meeting benefit payments to pensioners.
As such trustees are expected to undertake rigorous due diligence and scenario analysis to understand the risks and potential outcomes of their investment decisions. This should be embedded in a governance framework that enables effective oversight and supports challenge and accountability. Professionalism in trustee decision-making is no longer optional. It is essential.
Trustees must be equipped to interrogate complex asset classes, assess liquidity constraints, and understand how long-term investments interact with short-term liabilities. Where schemes are considering such a change to their investment strategy, we expect trustees to seek high-quality advice, document their rationale, and ensure alignment with the scheme’s objectives and integrated risk management approach.
At TPR, we support innovation. But not at the expense of prudence. We will continue to engage with schemes to ensure that governance standards remain high, and that trustees are making decisions that are not only bold but also balanced and evidence based.
The Mansion House reforms may reshape the investment landscape, but in the DB universe, it is trustee governance that will determine its role in helping scheme’s meet their long-term funding objectives.
ESG
Climate change, nature loss, and other systemic risks; including social factors, are no longer distant or abstract concerns. Where these risks are financially material, trustees have a clear duty: to understand them, to manage them, and to integrate them into their fiduciary responsibilities. It is also increasingly clear that these issues are important to savers.
Strong investment governance is not a luxury, it is essential. Especially in complex and evolving areas like ESG. We are raising our expectations in parallel with these emerging scenarios.
Trustees must ensure that their decisions are not only compliant, but long-term, well-evidenced, and open to appropriate challenge.
This is not just about ticking boxes. It is about effective governance and leadership.
In today’s changing pensions and regulatory landscape, trustees must go beyond compliance. They must lead.
That means engaging with emerging frameworks like the Taskforce on Nature-related Financial Disclosures. It means supporting credible transition plans. And it means embedding sustainability into the very core of investment strategy.
The challenges are real. But so are the opportunities. Trustees have the tools, the guidance, and the responsibility to shape a future that is resilient, responsible, and fit for generations to come.
Dashboards
Since 2016, we have been actively involved in the pensions dashboards programme, following the industry’s proof of concept. Over the years, government, industry, and TPR have remained committed; and now, the finish line is in sight.
In April, the first pension schemes connected to the central digital architecture built by the Money and Pensions Service. To this point 50 million records, including TPR and FCA-regulated pensions and the State Pension have been successfully linked. Real savers are now testing dashboards live, marking a major milestone.
However, dashboards rely on accurate, complete, and accessible data. Trustees are responsible, and we’ve made data quality a central focus. Last year, we intervened with schemes reporting data issues. We’re now examining the UK’s 50 largest schemes, covering 80% of occupational pension records, with meetings underway.
Medium-sized schemes must connect by 2026. To encourage further action our new campaign highlights:
- the importance of good data
- collaboration with administrators
- dashboards’ potential to transform retirement planning
Some DB schemes are delaying preparation due to plans to derisk or wind up. This is risky: unless buy-out is completed by 31 October 2026, dashboard duties apply, and trustees may face regulatory action. Good data also helps secure better buy-out rates and improves efficiency, automation, and decision-making.
We urge all schemes to ensure compliance, clean data, and readiness to connect. We’ll continue providing guidance and checklists to support progress.
The next steps
Trusteeship goes beyond the 'who'. It’s also about governance: the 'what' and 'how'. Trustees must operate schemes in a business-like way to manage systemic risks, not just follow technical agendas.
As our CEO Nausicaa Delfas said in June, given its impact on millions trusteeship must align with professional and corporate governance standards. Learning from other sectors and applying best practices is essential.
Trustees face growing responsibilities and must stay agile amid global investment challenges, climate and geopolitical risks, cyber threats, AI developments, and evolving corporate structures. They must also manage conflicts of interest effectively.
Governance spans all aspects of scheme oversight and mirrors corporate governance across four dimensions:
- structure
- processes and controls
- behaviours
- relationships – especially with outsourced services like investment management and member administration
We’re focusing on areas the market frequently raises, particularly professional trustee firms (PTFs). Sole trustee appointments are rising; 20% of DB schemes now use them, with a 13% increase last year. We’re examining how these models deliver effective governance and manage potential conflicts, especially in 'one-stop shop' arrangements.
We’ll engage further with PTFs and the wider market to understand risk controls and promote good governance. This includes offering guidance, clarifying expectations, and highlighting best practices.
We’re also working with government on its upcoming consultation on trusteeship and governance to shape a future-ready regulatory framework.
Soon, we’ll launch a new strategy outlining our priorities and approach to raising trusteeship standards through compliance and oversight. We’ll consult with the industry this autumn.
This strategy will reflect the traits our CEO outlined: saver-focused, open to challenge, skilled and diligent, collaborative yet accountable, and data-led.
Conclusion
To re-iterate my opening remarks; it is an exciting time for the industry. A time in which we must rethink what it means to be a trustee, an administrator and even a regulator.
As regulator, we have adopted a more prudential style of regulation, with a sharper focus on systemic risks and how trustees are embedding those risks into their investment governance.
We appreciate that there is a lot of change. Our industry is adapting to meet the needs of the next cohort of savers.
Though change can be anxiety making, we need only look at the successes of the last few decades to be assured that our future is in safe hands.
With your help we can enhance the best of the past with the requirements of the future and ensure the financial security of millions of workers.
I’m looking forward to working with you all.
Thank you for inviting me.
