Your self-administered DB scheme: an untapped asset?

On 17 September I had the pleasure of joining Sankar Mahalingham, our Head of Pensions Growth, and Chloe Scragg, founder of the Education Pensions Club, for a BUFDG webinar. Our question for the hour was whether a university's self-administered DB scheme could be an asset rather than just an obligation. Thank you to everyone who joined, and to Julia and the BUFDG team for hosting us. 

If you couldn't make it, here is a write-up of the main points. 

Who this was for 

The session was for universities with their own self-administered trust (SAT), where the institution is the only participating employer and the trustee board controls governance, funding and strategy. There are around thirty of these in the sector, mostly at pre-92 institutions and typically covering professional services and support staff. We did not cover USS, LGPS, SAUL or the Teachers' Pension Scheme.  

What you told us 

Chloe opened with early findings from the Education Pensions Club survey of university SAT schemes. On the positive side, respondents pointed to better governance, the appointment of independent professional trustees, and creative ways of recruiting and engaging member-nominated trustees, such as working with trade unions to find engaged colleagues and positioning the role as career development. 

The challenges were just as telling. There is real appetite to learn how other universities run their schemes and whether you are behind the curve. Many want more confidence that their set-up, advisers and suppliers are delivering value. Some know a SAT can be a financial asset in the right circumstances but haven't explored it, and trustee time, skills and capacity are a worry, particularly with so much change coming. 

Three layers of value 

To frame the rest of the session, we described value in a pension scheme as three layers. At the top is securing member benefits, which is the point of the scheme and the test for every decision. The second is the scheme as an asset to the university. A good DB scheme helps recruit and retain professional services staff, and the university is a beneficiary as much as the members. Underneath both sits cost, because money leaving the scheme unnecessarily erodes everything above it.  

Levers available now, and what changes in April 2027 

Sankar walked through six levers, most of which need no new legislation: 

The sixth deserves care. It already exists in law under section 37 of the Pensions Act 1995, but trustees needed to have passed a specific resolution before April 2016, and many scheme rules prohibit it outright. In practice it has been almost theoretical for most ongoing schemes. 

That is the barrier the Pension Schemes Act 2026 is designed to remove. It received Royal Assent in April and gives trustees a statutory power to amend scheme rules to allow surplus payments to the employer. Draft regulations have been consulted on, with the threshold set at fully funded on a low dependency basis plus an actuarial certificate that the scheme will most likely stay there for three years after payment. The regime is expected in force from April 2027, with no transitional measures. Details are still being finalised, so keep an eye on TPR guidance this autumn. 

One distinction catches people out: having a power to pay surplus is not the same as being allowed to pay it. You need both. 

What it means if your scheme is open 

Around 70% of university SATs remain open to accrual. The test for a cash payment is the same as for closed schemes, but open schemes have a second route. The Regulator's funding code says trustees may consider using surplus to meet the cost of future accrual. That is not a payment to the employer, so it sits outside the April 2027 regime, and in practice it shows up as a lower employer contribution rate. 

There are two honest catches. First, you cannot spend surplus twice. The Regulator's 2026 funding statement says surplus earmarked for another purpose, including future accrual, must be excluded when assessing how much investment risk a scheme can support. Second, the three-year test is harder for an open scheme because liabilities keep building as staff accrue, so you will probably want a buffer above the bare minimum. 

The reason to start early is practical. A rules review takes months, not weeks, and trustees will weigh how the surplus arose, including member contributions and past benefit changes. Groundwork now gives you a choice in April 2027 rather than a starting gun. For an open scheme, the realistic outcome is a lower contribution rate sooner, with a cash payment possible later if the rules, the funding and the member case all line up. 

Four funding positions, one scheme 

A scheme does not have a single funding position. It has at least four: the accounting figure, technical provisions, low dependency and buyout. They can differ by tens of millions on the same day. On the Regulator's May 2026 estimates, around 90% of schemes are in surplus on technical provisions, around 80% are above low dependency, and around 60% clear buyout. Moving the threshold from buyout to low dependency is what brings so many more schemes into scope, with nothing changing inside the scheme itself. Low dependency is the measure that matters, so ask which basis you are being quoted and where you sit against it. 

Where value leaks 

My part of the session covered the base of the pyramid. Costs tend to leak in four places: 

Beneath all four is governance judgement: how hard to push an adviser on a quote, how much time to spend on an overpayment, what advice is really needed and when. That judgement is hard to build from inside one scheme alone. 

Learning from each other 

Which brings us to peers. Chloe made the point that a university is an institution built on standing on other people's shoulders and learning together. The Pensions Club has seen members work together on own risk assessments, buy-in and buy-out projects, media responses and research into member engagement. 

Sankar gave a live example. Twelve of our schemes share an administrator, which proposed a new way of charging for dashboard-related work. We raised it collectively and secured a materially better commercial outcome than any single scheme would likely have achieved. You don't need twelve schemes to benefit from that principle. Comparing notes through the BUFDG board or the Education Pensions Club works on the same logic. 

Five practical steps 

We closed with five actions, relevant whether you are in surplus now or expect to be: 

The thread running through all five is to have the broader conversations earlier, with your trustees, pension team, advisers or an independent professional trustee. 

Get involved 

The Education Pensions Club survey of university SAT schemes was open until the end of September, and we would love your perspective if you have not yet taken part.  

If you would like a copy of the slides, or want to talk any of this through, please get in touch at emma.pittaway@lawdeb.com.  

You can also reach Sankar at Sankar.Mahalingham@lawdeb.com and Chloe at chloe@charitiespensionsclub.com.