Having spent decades working in pensions, I’ve seen cycles of surplus and deficit, but the current position – with over £200bn in combined scheme surpluses – feels fundamentally different.  It forces a critical question: have we, as trustees, become “excessively prudent” and in doing so, will this be to the detriment of members?

My admiration for the Mineworkers’ and Stagecoach pension trustees has grown because they’ve answered this question boldly.  Investing within appropriate regulatory guardrails, they’ve used investment returns, not just to secure benefits, but to improve them for members.  Hearing John Hamilton detail the significant boost for Stagecoach members post-Aberdeen deal was a wake-up call.  It should be one for all trustees of well-funded schemes.

The Pendulum Swing: From Surplus to Deficit and Back Again

My pensions career began in the late 1980s, amid the first “surplus regulations.”  Back then, open schemes with high equity allocations faced a choice: contribution holidays, benefit improvements, or a tax bill.  The concept of derisking to “lock in” a position was alien; the focus was on using returns to maintain pensions’ real value through discretionary increases.

Then the pendulum swung.  Legislation improvements, accounting changes, and scheme closures shifted the narrative entirely.  The PPF’s creation and the Pensions Regulator’s necessary focus on protection made “derisking” the mantra.  Equities were swapped for bonds, deficits grew, and the singular goal became a slow, painful march toward insurer buyout.

The New Crossroads: Security is the Floor, Not the Ceiling

Today, funding levels have transformed.  Security is now the baseline.  The Stagecoach transaction has shown that for well-funded schemes the current frontier of fiduciary duties is member benefit improvement.  This challenges the orthodox endgame playbook – especially for the largest 200 schemes who have the scale to run on.

As trustees, we must now grapple with four critical issues:

1. The Goal: Guaranteed Minimum or Meaningful Maximum? Is our duty merely to secure the contractual minimum, or—when a scheme is powerfully funded—to pursue the best possible outcome for members?  Stagecoach chose the latter.  For other strong schemes, not exploring this path is a choice in itself.

2. The “Reckless Prudence” of Investment Strategy. We’ve derisked to below insurer levels.  But here’s the irony: if we transferred to an insurer tomorrow, they would likely re-risk the portfolio to generate profit.  Why do we outsource the potential for upside to a third party?  TPR guidance and guardrails are informative and so what’s stopping us from operating under a prudent, well-governed re-risking strategy for members’ benefit today?

3. The Silent Sponsor & The Forgotten Surplus. Many sponsors see de-risking as a way to remove balance sheet volatility.  But this often means gifting hundreds of millions in future surplus to an insurer.  Why aren’t more initiating surplus-sharing discussions?  A transparent model (e.g., one-third to augment member benefits, one-third to the sponsor, one-third to enhance DC pots for the workforce) could align all stakeholders and create immense value.

4. The Unfinished Business: GMP Equalisation. This is a stark litmus test.  How many schemes are knowingly underpaying members their legal due, with no clear remedy plan?  It’s unacceptable.  How can accounts be signed off without disclosing this?  Fixing GMPe isn’t just administrative; it’s a core fiduciary duty and a prerequisite for any higher ambition.

A Call for a New Trustee Mindset

The Stagecoach deal isn’t an anomaly; it’s a beacon.  It shows that for well-funded schemes, the historical “deficit mentality” must evolve into a “surplus opportunity” mindset.

I’m keen to hear from fellow trustees and professionals:

· How many boards are actively exploring benefit improvement strategies?

· Does a material surplus change members’ legitimate expectations of what we should deliver for them?

· Is it time to re-risk portfolios strategically, mirroring insurer economics for members’ gain?

· How do we move GMPe from the back burner to the top of the agenda?

The era of simply minimising risk is ending.  The new challenge is to optimise outcomes.