XPS Pensions: revenue up 12% as pension surplus release creates new advice work

Up 7% at 331p (£690m) - Post-close Trading Update

This pensions consultancy/administration business has enjoyed a remarkable few years of growth:

FY March 2027 is shaping up to be another good year: today's update says that they are "confident of achieving full year results slightly ahead of its expectations".

Key points:

• Total H1 revenues +12% (11% organic)

• Advisory revenues +14% (12% organic)

• Administration revenues +10%

• Self-invested pensions (SIP) +7% (XPS is a SIPP/SSAS pension provider, trustee, and administrator.)

Changes to the pension landscape provide fertile environment in which it can sell its advice and services: "We have seen strong demand arising from ongoing regulatory change, including from pension schemes seeking advice about running-on for surplus extraction."

You've probably noticed that many pension schemes we've covered in this report have recovered from deficit into surplus. When a defined benefit pension fund reaches such a healthy state, the employer will very often sell the whole thing to an insurance company.

However, where there is a large surplus, there is also the choice to run it on. The Pension Schemes Act 2026 "allows, with strict safeguards, for surplus to be shared between sponsoring employers and members".

In other words it should soon be possible, subject to many conditions and safeguards, for employers to share in the surplus value that their pension funds have created. This additional value is no longer "trapped".

Figuring out how to execute this means a new source of work for the likes of XPS:

Pensions Act 2025 received Royal Assent in April 2026, and DB surplus release is set to begin from 6 April 2027. This is expected to increase demand for advice as well-funded defined benefit schemes consider whether to run on for surplus or pursue an insurer buyout. XPS is well placed to support either route by providing expert consultancy every step along the way, following the members and providing award-winning pensions administration services either directly or on behalf of insurers.

And a comment from the CEO of XPS:

"The pensions industry continues to be very busy, and our clients have a wide range of opportunities in front of them, particularly with the new surplus release regulations coming in April next year. We are really well placed to help them whether running on is on their agenda, or if they want to access one of the many options emerging in the risk transfer market.

Graham's view

We've been AMBER/GREEN on this and I'm content to leave that unchanged today.

It continues to surprise me how much work is being generated by defined benefit schemes.

One risk that I do wonder about is what will happen when the complex questions about what to do with these DB pension schemes have finally been answered. XPS will always be challenged to evolve with the changing pension landscape, and it strikes me that simpler DC pensions may (in general) not require such complex consultancy as DB pensions.

In the short-term and medium-term, however, XPS is an example of a very successful financial consultancy and administration outfit, and there is every chance that it will continue to find new ways to serve its customers, e.g. by focusing more on insurance. At this moderate valuation, let's keep our moderately positive view.