Vulnerable surplus positions, pension dashboards and asset de-risking: the operational reality of buyout means a quick journey to endgame is unlikely to be the case. The UK's defined benefit pension landscape is at a pivotal juncture. Years of improving funding positions have transformed buy-in and buyout plans from distant aspirations into tangible objectives for many schemes. Yet this progress brings fresh complexity. As schemes advance towards bulk transfers, they must navigate a gauntlet of operational challenges -from divesting substantial illiquid asset allocations to completing comprehensive data audits - while also managing member expectations and securing adequate administrative support. Professional Pensions latest research, Pensions endgame: A new buyout reality for trustees, examines how trustees and their advisers are responding to these pressures. The survey, produced in association with PIC, reveals a market characterised by careful preparation rather than hasty action. While bulk transfers remain the preferred endgame for many, the path forward is far from uniform. Many schemes are facing critical decisions about asset de-risking strategies, the timing of insurance market approaches, and whether their current service providers possess sufficient capacity to support their objectives.
Pensions endgame: A new buyout reality for trustees.
Investing in the assets of the future
Chapter 3.
Investment risks and surplus challenges
Chapter 2.
The race to be buyout ready
Chapter 1.
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For example, the research suggests administrator capacity is a particular concern, with market-wide challenges around GMP equalisation, pensions dashboards, and labour force constraints testing the industry's infrastructure. Meanwhile, the proposed policy changes on surplus extraction add another dimension to trustee deliberations. Perhaps most striking is the evidence of trustees' pragmatism. Many recognise their funding positions remain vulnerable to economic shocks, tempering enthusiasm for ambitious surplus strategies. The research suggests a measured approach to de-risking, one that balances the pursuit of buyout with the operational realities of achieving it. For pension professionals, this survey provides valuable intelligence on peer behaviour and market sentiment. It highlights where schemes are focusing their efforts, which obstacles loom largest, and how priorities around factors such as customer service are reshaping selection criteria for bulk transfer partners. Understanding these dynamics will prove essential for anyone guiding schemes through this critical phase of their lifecycle. Explore the survey results in depth below.
“This survey provides valuable intelligence on peer behaviour and market sentiment”
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Newly aligned long-term goals
De-risking and data: The two roadblocks to buyout
How administrative capacity is impacting the path to buy-in/buyout
The questions around surplus extraction
How administrative capacity impacts the path to buy-in/buyout
Chapter 4.
Vulnerable surplus positions, pension dashboards and asset de-risking: the operational reality of buyout means a quick journey to endgame is unlikely to be the case. The UK's defined benefit pension landscape is at a pivotal juncture. Years of improving funding positions have transformed buy-in and buyout plans from distant aspirations into tangible objectives for many schemes. Yet this progress brings fresh complexity. As schemes advance towards bulk transfers, they must navigate a gauntlet of operational challenges -from divesting substantial illiquid asset allocations to completing comprehensive data audits - while also managing member expectations and securing adequate administrative support. Professional Pensions latest research, Pensions endgame: A new buyout reality for trustees, examines how trustees and their advisers are responding to these pressures. The survey, produced in association with PIC, reveals a market characterised by careful preparation rather than hasty action. While bulk transfers remain the preferred endgame for many, the path forward is far from uniform. Many schemes are facing critical decisions about asset de-risking strategies, the timing of insurance market approaches, and whether their current service providers possess sufficient capacity to support their objectives. For example, the research suggests administrator capacity is a particular concern, with market-wide challenges around GMP equalisation, pensions dashboards, and labour force constraints testing the industry's infrastructure. Meanwhile, the proposed policy changes on surplus extraction add another dimension to trustee deliberations.
This report is based on findings from a quantitative survey conducted by Professional Pensions in June and July 2025. The research targeted pension scheme professionals working within defined benefit schemes, including schemes with a range of end-goal strategies as well as those yet to determine one. A total of 130 responses were collected, with trustees accounting for 77% of the sample. The respondent base represented a broad spread of scheme sizes, with approximately one-third each from small schemes (under £100m in assets), mid-sized schemes, and large schemes (over £1bn in assets).
Methodology
Newly aligned long-term goals.
Stronger funding levels are accelerating DB schemes toward buy-in and buyout, with most planning to engage insurers within two years. Healthy funding levels have made buyout a realistic option for many defined benefit (DB) schemes, with 28% of survey respondents over 105% funded and a further 18% between 100% to 105% funded. Only 6% reported their scheme was under 80% funded on a buyout basis. The survey also found that a bulk transfer continues to be the long-term goal for the majority of DB pension schemes (55%). This aligns with wider market research that anticipated another “very busy” bulk annuity market with volumes expected to exceed £40bn for the third year running*.
Bulk transfer continues to be the long-term goal for the majority of DB pension schemes (55%)
However, 45% are divided in how they see their long-term goal with just under half of these (19%) having yet to agree on an objective and 15% expecting to run on in the medium-term whilst resolving data and asset issues. Moreover, the survey suggests many would prefer to be part of the 55% majority pursuing a buy-in or buyout. Of those not currently considering a buy-in or buyout, half (51%) would do so if it were affordable indicating this position reflects their current funding levels and not an aversion to either buy-in or buyout. “This indicates that even where buy-in/out is not currently affordable and a long-term plan has not been decided upon, it still remains the long-term aspirations for many schemes over and above other endgame options," adds Deepash Amin, head of new business strategy at PIC. While many of the 45% divided on their long-term goals may work through such issues in pursuit of a buyout, there is evidence that a minority of schemes are actively pursuing other routes. For instance, 7% of respondents expect to run off over the long-term to release surplus; 4% are targeting a superfund or consolidator. "What is striking is that 'undecided' is more popular than the often-mooted alternatives to buyout such as run-off or a superfund," says Glyn Gaskarth, senior manager of thought leadership and external affairs at PIC. "The figure considering buyout could even be higher as 15% are working through data and asset issues.”
A majority of schemes expect to approach market within the next two years to secure a buy-in or buyout. One-third (32%) of respondents anticipate doing so in the next 12 months and a further (29%) expect to approach insurers between one-to-two years from now. To understand how schemes are preparing for market readiness, respondents were asked what percentage of their schemes were allocated to illiquid assets such as infrastructure. The majority (70%) reported having allocations of up to 10% of their assets in illiquid holdings.
How well-funded is your scheme currently?
28%
More than 105% funded on a buyout basis
100% to <105%
18%
95% to <100%
20%
90% to <95%
10%
85% to <90%
12%
80% to > 85%
6%
Key
Would you consider a buy-in or buyout, if deemed affordable?
55% Targeting buyout
15% Expecting to run on medium-term whilst we resolve data and asset issues
19% Not yet agreed a long-term goal
4% Targeting superfund/ consolidator
What is your scheme’s long-term goal at present?
Less than 80% funded on a buyout basis
51%
YES
35%
NO
14%
UNSURE
Preparing for buy-in and buyouts
*Source: AON, Bulk Annuity Market Update H1
When might you expect to be in a position to approach the insurance market to secure a buy-in or buyout?
32% Within 12 months 29% Between 12 and 24 months 28% More than 24 months 11% Other
What percentage of your assets are invested in illiquid assets like infrastructure?
70% Between 0% and 10%
17% Between 11% and 20%
10% Between 21% and 30%
2% Between 31% and 40%
0% Between 41% and 50%
0% Between 51% and 60%
1% Between 61% and 70%
1% Between 71% and 80%
0% Between 81% and 90%
0% Between 91% and 100%
Hover list item to show segment
7% Expecting to run off over the long-term to release surplus
4%
7%
15%
19%
55%
[If not considering buyout OR not considering buy-ins]
De-risking and data: The two roadblocks to buyout.
Schemes are focused on de-risking and cleaning their data, but illiquid assets are slowing progress toward buy-ins and buyouts. When asked to identify the biggest risk facing their pension scheme, survey respondents selected investment risk as the second most selected by trustees (closely following the threat of cyber security breaches). However, derisking pension scheme assets was found to be a clear priority for all respondents whether they were targeting buy-in/buyout or not - 31% of all respondents ranked “de-risking scheme assets” in their top 3 priorities for the next year. That rises to 35% among respondents who are targeting buyout. High percentages of respondents were prioritising preparatory tasks such as refining their data, completing benefit audits and appointing a de-risking adviser.
What do you think are the biggest risks facing your pension scheme currently?
In your view, is extraction of any surplus in the best interests of your scheme's members?
Yes
No
41%
We are considering the merits
49%
Reducing exposure to illiquid holdings could be a challenge given, by their very nature, these are assets that can be hard to dispose of. Additionally, with so many pension schemes actively trying to divest from these, this could further exacerbate liquidity constraints in certain markets. Respondents were evidently aware of these challenges and only 16% expected their illiquid asset reduction to take less than 12 months, with the plurality (41%) predicting a timeframe of between one and two years. "Two years is a fairly short time horizon given buyout project timescales, especially if preparatory projects need to be completed first and it can be fitted around market solutions deferred premium," adds Tristan Walker-Buckton, co-head of origination at PIC. In contrast, insurers operating in the pension risk transfer market are looking to increase investment in illiquid assets such as infrastructure indicating that acts to speed the passage of buyout could yield significant benefits.
Getting the data right
Given the greater competition to secure an insurer for buy-in or buyout, pension schemes going to market are under more pressure to ensure they present a clean and attractive proposition. Issues with data that would be time-consuming and costly to resolve will delay buyouts. “Prior to coming to market we expect the trustees to ensure the data is of high quality and the benefit specification have been reviewed by their legal advisors and administrators," says PIC's Amin. "Insurers would also expect a recent postcode and marital trace to have been completed. This will ensure that trustees are receiving accurate pricing and there are no surprises during data verification." It was evident in the findings that many schemes in general were currently implementing data audit and cleansing projects (53%) and a review of scheme administration and benefits (31%) with similar figures for schemes targeting buy-in or buyout. More schemes targeting buyout had already completed data audit and cleansing (24%) compared to all schemes (19%). This is perhaps not a surprise, given the large amount of data some schemes may have and particularly if they have been involved in industry M&A and taken on additional schemes’ members as a result.
There are no restrictions
29%
Only if the members receive a percentage of the surplus
On wind up
59%
Under which of the following conditions can your scheme return its surplus?
Cyber security risk Investment risk Operational risk / delivery of member administration Longevity risk Regulatory risk Sponsor covenant risk Direction of pensoin policy Inflation risk Interest rate risk
1
2
3
4
5
6
7
9
8
A key priority for how pension schemes de-risk their assets is managing their illiquid holdings, which has become a key challenge as more schemes’ funding levels improve. According to LCP over 2023 and 2024 four insurers have accepted illiquid assets totalling approximately £3.1bn as part payment of insurance premiums – representing around c4% of the total premiums paid in that period. In addition, there has been a wide spread of the types of illiquid assets accepted, covering private credit, infrastructure debt and equity, real estate debt and equity, and even private equity. Of the schemes in the survey targeting buy-in or buyout, 44% have already reduced their illiquid asset allocations while 24% are currently working on this. A further 15% are planning on reducing holdings in the long-term.
The illiquid asset issue
Already implemented
Currently implementing
Planning to implement
Considering over next 24 months
Not considering
What actions are your scheme considering to progress towards your long-term goal?
Transitioning to a lower risk investment strategy Reducing allocation to illiquid assets Review of scheme administration and benefits Buy-ins Data audit and cleansing projects Buyout
Buyout
Buy-ins
Review of scheme administration and benefits
Reducing allocation to illiquid assets
Transitioning to a lower risk investment strategy
Data audit and cleansing projects
How administrative capacity is impacting the path to buy-in/buyout.
Digital functionality, responsiveness, and customer satisfaction are increasingly influencing bulk transfer partner selection. With many schemes actively prepared to go to market, considerations are naturally turning to the impact this has on the service provider market. This will be a critical period for many schemes and there is a growing expectation for administrators to be able to help, as well as to deal with the numerous other issues they face such as the pensions dashboard, GMP equalisation, labour force issues and more. Tellingly, less than half (46%) of schemes on the journey to buy-in or buyout were confident that their administrator had the internal capacity to handle their needs. A third of schemes (34%) believed that while their admin was currently sufficient, they had concerns about whether it would remain so. Although only 20% thought their schemes admin was currently not sufficient to support the path to buyout. Together with the need to deal with substantial illiquid allocations, the lack of administrator capacity signals that there will be a long tail of buyouts rather than a short-term glut. This may be why on future priorities the admin factor - preparing for GMP equalisation - came above preparation for buyout and de-risking assets which ranked second and third, respectively. However, over the years the bulk annuity industry has demonstrated its ability to evolve and innovate. "At PIC, we pride ourselves in looking for solutions before issues become too large to resolve," says Amin. "While there are constraints, we do not believe administrator capacity will hold up the wider industry’s pursuit of buy-in/buy-out.”
Not currently, but their capacity is improving
Yes, but I have concerns whether it will remain so
34%
46%
Do you think your administrator’s internal capacity is currently sufficient to support your scheme’s buyout journey?
Very important
Quite important
Not very important
Overall level of customer service for policyholders Customer satisfaction reputation and evidence Commercial offer / price Experience and credibility of team Transaction certainty Post-transaction transition capability Ability to provide tailored solutions Social value / sustainability credentials
If you were selecting a provider of buy-in or buyout insurances, how important would the following factors be in your decision making?
Buy-in and buyout is a delicate time for schemes, with trustees having to ensure that such transactions not only make sense from a financial standpoint but also in the service their members receive. At these critical junctures, trustees are showing a greater appreciation for customer service as a factor in the decision-making process of selecting a firm for a bulk transfer. Among all schemes, customer service to policyholders was a greater priority than price (75% vs 67%) and customer satisfaction reputation and evidence of customer service was equal with price. Traditional deal-based factors such as commercial offer/price, experience and credibility of the team, and transaction certainty all received between 65% - 67% support. On customer service, priority factors such as digital functionality and customer service response times scored above the provision of general financial advice and member webinars.
The priority of customer service
Not at all important
How would you currently rate the quality of your scheme’s admin service to members?
10
25%
5%
Encouragingly, when asked how schemes admin are dealing with members, respondents reported this to be broadly in a good space. When asked, the largest percentage (25%) ranked the level of service they provide as 8 out of 10, with 31% even going further.
Already implemented Currently implementing Planning to implement Considering over next 24 months Not considering
Post-transaction transition capability
Ability to provide tailored solutions
"Policymakers rely on their pension for financial security, it's a responsibility and a privilege to be trusted with so we take it very seriously," says Andy Rose, head of pension services at PIC. "When a policyholder contacts us, our dedicated UK team responds quickly, with good quality and easy-to-understand information focussed on achieving good outcomes. This is how we have secured a 98% customer satisfaction score for the last 13 years.”
The questions around surplus extraction.
Concerns over funding vulnerability, administrative capacity, and regulatory restrictions are driving a cautious approach to releasing surplus outside of buy-in or buyout. With more schemes now in surplus, new rules are being included in the Pension Scheme Bill that aim to expand “surplus sharing”, with the government “minded” to allow surplus payments to be made to employers on a “low dependency funding basis.” However, respondents overwhelmingly (75%) said these new rules around surplus extraction would not change their views. Only 12% were still considering the potential impact of the new rules. The remaining 15% were fairly evenly split between acknowledging a longer timeframe for buyout, seeing a longer term run-on or increased likelihood to re-risk and target a larger surplus.
“Schemes can get to full funding either from investment or contributions from the sponsor,” says Wesbroom.
Concern around the durability of surplus
Half of respondents acknowledged that their surplus is vulnerable to outside shocks. Many believed an economic downturn would remove some or all of their surplus (split 40% and 10% respectively), while 15% reported as being unsure about whether their surplus was vulnerable. This shows how vulnerable these funding positions are and why many trustees are reluctant to explore surplus release outside of a buy-in or buyout.
13%
62%
Our research showed that marginally more schemes approaching buy-in or buyout were reviewing their position on the feasibility of releasing surplus than for all schemes (31% vs 29%). This is a useful reminder that surplus extraction and buy-in or buyout are not mutually exclusive as surplus can be extracted through buy-in or buyout. Furthermore, the vast majority of respondents said there were restrictions on how they would be able to return a surplus. Of this cohort, 62% said they would only be able to do so upon the winding up of their scheme while 13% revealed they could only do so if members received a percentage of the surplus. The remaining 25% reported no surplus restrictions at all. “Trustees remain absolutely focused on their duty to ensure payments to pensioners are made in full and are not put at risk, which is why most of them remain ultimately focussed on buyouts," adds Seecharan. "We don’t believe this will ultimately change materially, although decisions could be delayed if trustees become required to consider a wide range of options.” This may be why very few trustees (2%) said they had asked or were planning to ask members if they thought surplus extraction was a good idea. The overwhelming majority (86%) said they had not discussed this with members and had no plans to ask, with the remaining 13% said that while they hadn’t broached the subject they were going to.
Tom Seecharan, co-head of origination at PIC, is not surprised by this preference among trustees. “Both buy-in and buyout provide security for pensioner benefits and allow for responsible surplus release," he says. "In contrast, many trustees will rightly be worried that surplus release outside of a buy-in or buyout increases the risk that pensioner payments will not be made in full.” Trustees were sceptical about the concept of surplus extraction, with many seeing this as at odds with their scheme members’ best interests. When asked about this, only 8% agreed surplus extraction was a positive for members while nearly half (44%) said it was not. The remaining 48% said they were still considering the merits of surplus extraction for members.
No, but planning to ask
2%
Have you asked, or are you planning to ask, your members if they think surplus extraction is a good idea?
Do the recent proposals on the extraction of surplus affect your views on the best long term goal for your scheme?
Yes - Still targeting buyout but timeframe longer
8%
44%
Yes - More likely to target longer term run on
Yes - Likely to re-risk to target a larger surplus
No change in our views
Still considering potential impact
48%
Unsure
Yes - some of our current surplus
40%
Yes - all of our current surplus
Are you concerned that an economic downturn could remove some or even all of your scheme’s current surplus?
No and no plans to ask
86%
