Most defined benefit pension schemes in the UK continue to target prompt buyout, according to a new survey by WTW. However, strategies are being reviewed and half of £1bn+ schemes expect to run-on.
Running a scheme on and sharing surpluses between employers and scheme members should become easier from 2027, when new legislation is expected to come into effect. On average, respondents say that surplus-sharing deals would be acceptable if members received one third of the money distributed.
Some of the key findings from WTW’s Endgame Report 2026 include:
– Most schemes currently expect to buy out, but half of £1bn+ schemes are looking to run on: 65% of respondents say that they expect to transfer liabilities to a third party, usually an insurer, but this falls to 50% amongst £1bn+ schemes. While 85% of schemes had already considered their options carefully, strategies are not set in stone, with 57% anticipating a review within two years. 37% report that trustees and sponsors are not currently well aligned.
– Employers are expected to receive a greater share of surplus than members: Across all respondents, the average view was that it would be acceptable if members received one third of surpluses distributed if their scheme were to run on. Underneath this, there was a range of responses: few (6%) insisted that members should get most, with the rest saying they would accept either a 50:50 split (35%) or various splits in the employer’s favour (totalling 59%). Answers from trustees and sponsoring employers did not differ greatly.
– How much should be retained in the scheme? The Government has indicated that it will reduce the statutory funding hurdle for making payments to an employer, but schemes can set buffers on top. Nearly half of respondents (44%) anticipate being prepared to share surplus relative to the proposed new basis. This rises to 58% amongst £1bn+ schemes.
– Buyout market to stay buoyant: Among schemes looking to transact, two thirds expect to do so by 2032. Where schemes are already fully funded on a buyout basis, 56% expect to insure all benefits by 2029.
– Is buyout seen as a good deal? Around 70% of respondents regard buyout as a good deal for members and for sponsors. Nearly all (97%) say that insurers get a good deal; only 18% say that buyouts represent a good deal for the UK economy.
“Improved scheme funding and competitive insurer pricing means that most schemes can now afford the most expensive item on the menu – buyout – and place more emphasis on factors other than price when selecting a provider,” said Bina Mistry, Senior Endgame Strategist and Head of Corporate Pensions Consulting at WTW.
“With schemes now able to choose from more endgame strategies than ever before, some of the destinations previously pencilled in are being reviewed. Making promised benefits secure is a top priority, but there are different views about how best to achieve security and how to balance this against the prospect of benefit enhancements and surplus refunds,” added Adam Boyes, Senior Endgame Strategist and Head of Trustee Consulting at WTW
“The Government says that the potential for members to gain from employers having easier access to surplus while a scheme is ongoing is vital to the success of its policy and sees trustees’ veto over any surplus release as a strong negotiating card. In playing it, trustees will be mindful of the circumstances of their scheme, including what the rules say, the balance of powers between the trustee and the employer, and any reasonable expectations that members might may have. While most trustees surveyed indicated that they would settle for members receiving less than employers if surplus were to be distributed while the scheme is ongoing, these views will be provisional and the precise division will vary scheme by scheme, potentially by a lot.”
