Why pension governance needs to adapt as DB schemes enter a new phase
Defined benefit (DB) pension governance is under pressure to evolve as schemes move into a different phase. After more than a decade focused on deficit recovery and derisking, improved funding levels are reshaping priorities and forcing trustees to make more complex strategic choices.Â
The latest Annual Funding Statement from the Pensions Regulator shows around 90% of schemes are now in surplus on a technical provisions basis, 80% on a low dependency basis and around 60% on a buy-out basis. This signals progress, but raises a new question: what should schemes do next?
At the same time, the sector is being reshaped by consolidation, regulatory reform, artificial intelligence, evolving funding levels and increased scrutiny around value for money. Governance is increasingly a strategic tool that must adapt to very different schemes, risks and endgame journeys. The risk is no longer simply weak governance, but governance that is not fit for purpose.
Different schemes, different governance needs
Data from the Pension Protection Fund’s Purple Book 2025 shows why a single governance framework is now unrealistic. Around 80% of schemes have fewer than 1,000 members, but these account for a small share of assets. By contrast, a small number of large schemes hold most DB assets and membership. This creates two governance worlds:
Often face resource and budget constraints.
Manage greater complexity and risk.
Most DB schemes are now closed to new members and/or future accrual, and active membership has fallen sharply from 3.6m in 2006 to around 0.7m today. The industry is increasingly focused on run-off, risk transfer, consolidation and endgame planning.
However, there is no single route forward. Even schemes with similar funding levels may take different paths – buy-out, run-on or consolidation – while others remain in limbo due to data gaps or lack of clarity in strategy. This position has evolved over the years and trustees are faced with more options which obviously, brings benefits but also complexity in decision making.
Governance is becoming more strategic, and more behavioural
As schemes mature, governance is shifting from operational oversight to strategic decision-making. But it is not just about structure; it is also about behaviour, confidence and culture. Data can show funding levels and membership profiles, but not how boards make decisions, challenge advisers, or define strategy. Two similar schemes can therefore act very differently.
Schemes also operate in an interconnected environment. Employer covenant, market conditions, regulation and member behaviour all interact, and its governance that turns these moving parts into coherent decisions.
That is why governance needs to start with strategic intent. Trustees and sponsors need to be clear about where the scheme is heading, and governance effort should then be aligned to that direction, rather than inherited from how the scheme has always operated.
Regulation is raising expectations but preserving proportionality
The governance direction of travel, set out in consultation by the Department for Work and Pensions, points to higher standards, stronger oversight and greater focus on outcomes. It also stresses proportionality, while ensuring all schemes can manage modern risks.
Trustee expectations are also widening beyond technical pensions knowledge to include investment complexity, ESG, endgame strategy and digital capability, including AI and cyber risk. However, capability alone is not enough. Behaviour, in my opinion, is a key part, and it is important for us as an industry to understand if trustees are confident in their decision making or if decisions are being deferred or defaulting to familiar approaches. With this understanding, we can support boards in the right way.
What effective governance looks like
Strong governance typically features clear strategy, disciplined decision-making, trusted advisers and focus on member outcomes. Where it breaks down, the issues are often practical: long agendas, information overload, and inconsistent data. Too often, meetings focus on reporting rather than decisions.
Governance improvements do not always require major change. Agendas should prioritise decisions, papers should be shorter and clearer, and risk should be integrated into discussion rather than treated separately. Governance reviews can be simple and a value addictive way of testing alignment with strategy.
Looking ahead, the strongest DB schemes will be those with governance that can adapt as circumstances change. Proportionate, data-led, outcome-focused and honest about the skills and behaviours needed around the table. Success will depend less on uniform standards and more on fitness for purpose, ensuring governance supports the right decisions for each scheme’s risks, members and endgame journey.
This article originally appeared on Mallowstreet’s website hereÂ
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