The UK’s pension risk transfer market posted another strong year in 2025 both in terms of activity and aggregate premium transacted. Greg Winterton caught up with Alan Greenlees, Professional Trustee and Head of Risk Transfer at ZEDRA, to get his insights on a range of sub-topics within the space as 2026 begins.
GW: Alan, given the legislative push to make it easier for well-funded schemes to extract surplus, how has your ‘default’ advice changed? Are you seeing a genuine shift in professional trustee appetite toward ‘running on’ for surplus generation rather than a de-risking solution?
AG: The BPA market continues to thrive. Official numbers for 2025 will be released later in the year, but we are expecting between 300-350 deals to be confirmed and over £40bn of volume. The change in surplus extraction rules clearly hasn’t dampened appetite so far.
The regulations are making it more viable for schemes to run-on, either indefinitely or to defer a BPA transaction for a number of years, whilst sharing surplus between the sponsor and trustees for funding benefit augmentations and discretionary increases. This may be a prudent approach for schemes that have data and administration challenges for example, and need the time and resources to resolve in advance of a transaction. The changes in surplus rules will not have moved the needle for those already considering it, but likely acted as justification for those who were on that path.
A scheme’s individual endgame journey will be dependent on a number of factors, key to which is the risk appetite and views of both the trustees and sponsor. Overall, the benefits of a BPA transaction are well known and it remains an attractive option for many. The traditional view of a BPA transaction being the ultimate goal for a scheme, and it being the ‘gold standard’ is still present, but less dogmatic as previous. Advisors and trustees are more cognisant of alternatives to BPA and no-one should be sleep-walking into a BPA transaction without a fully informed discussion beforehand.
The endgame is also directly linked to the size of scheme. For example, it is more difficult for a £150m pension scheme to run-on and generate surplus as a scalable solution, compared to a £1.5bn scheme. I do expect several +£1bn schemes to devise innovative run-on solutions and generate surplus, underpinned by a strong covenant of course. Such run-on solutions need to have sufficient guardrails and flexibility that they can easily pivot towards a BPA transaction if experience moves against them.
GW: With regard to illiquid assets, what are the most effective strategies you’ve seen for managing them on the journey to buy-in or buy-out? Are you using more secondary market sales or deferred premium structures, and if so, why?
AG: The secondary market has grown in recent years, with a number of advisors facilitating these trades. These platforms can remove a lot of the complexity of dealing directly but can be expensive to use and require a level of investment knowledge to successfully navigate. But the benefits can be worth it.
Insurers offering a deferred premium does help, as does the insurers who offer to receive illiquid assets in specie. In specie transfers are not common and it is safe to say that the insurer is keen to receive such assets; instead, they offer such a service purely as a means to facilitate the BPA transaction, rather than it representing an attractive investment opportunity. We have also seen schemes sell down their illiquid assets with a material haircut (sometimes as much as 30%) in order to meet the tight timescales of a deal. Whilst trading at a lower price may seem like poor judgement, that should be weighed up against the ongoing running costs of a scheme and the pricing opportunities available.
However, it is worth putting illiquid assets into perspective. They are not a challenge for most schemes in the market, including those who did not access them. Even where illiquids did once pose a challenge, the market generally responded very well (and quickly) to provide workable solutions. Illiquid assets will still be a challenge for some schemes but it is not as much of a barrier as previously and certainly would not feature in my ‘top five’ of current challenges the market is experiencing.
GW: What’s your view on some of these ‘off the shelf’ solutions from insurers – and even now, advisors – for smaller schemes looking to transact? What’s working well, what could be improved?
AG: The market has continued to innovate in several areas, with smaller schemes being one of the beneficiaries of the new wave of ‘off the shelf’ solutions. Smaller schemes – which I take to mean those with assets sub £100m – are now better served with streamlined insurer solutions and delivery tools from advisors. It has enabled schemes to have access to more competitive pricing and generally more engagement from insurers. Trustees and sponsors of those smaller schemes will have had a “take it or leave it” price from one, perhaps two insurers in the past. We are now seeing a much more competitive landscape and schemes able to look beyond pricing in order to deliver the best outcomes for the members.
Whilst this is certainly an improvement, the streamlined smaller scheme solutions are not yet at the panacea stage. We see a lot of variation in these streamlined solutions and there is a material amount of input required by administrators and advisors to complete these templates. This inevitably comes at a cost as well, which may be challenging for those schemes operating on a budget. A level of standardisation or universal insurer template is very much high up on the trustee wish list.
GW: The 2025 Pension Schemes Bill simplified the ‘gateway tests’ for superfunds like Clara-Pensions and last year also saw the entry of a new superfund, TPT, into the market. Are superfunds set to become a mainstream competitor to the BPA market, or are they still only suitable for specific ‘distressed’ or ‘unsupported’ scenarios?
AG: There are a number of alternative solutions to the BPA route that continue to provide optionality for schemes. The first few Clara transactions were quite niche and for distressed sponsors, but Clara, and TPT, are capable of catering for much broader schemes. Both Clara and TPT have the scale behind them to be very successful in this market and have clearly thought about their propositions.
Whilst these alternatives will gather interest and the superfund market will grow, they are unlikely to be a direct competitor to the BPA market, both in terms of number of transactions and deal volume. This is more due to the size and developed nature of the BPA market. However, I suspect that the insurer commercial teams will continue to monitor how the superfunds evolve and if they develop into genuine competitors.
GW: With the pensions dashboards finally active and The Pensions Regulator focusing on administrative resilience, how are you evaluating an insurer’s administration and digital capabilities during the beauty parade?
AG: Member experience is by far and away the most critical non-pricing factor that we focus on when assessing insurers’ proposition. In some selection exercises, the member experience will even trump price as the principal factor.
Trustees expect that administration standards are no worse as part of a BPA transaction, and in many cases, it may be reasonable to expect a stepped improvement by moving to an insurer. Therefore, focusing on the insurers’ administration capability, both current and for the future, is really important. This extends to resourcing, service levels, online member services and the digital retirement journey. And this goes hand-in-hand with questions around the cyber resilience of their systems, especially when so much sensitive data is at stake.
GW: There has been increased scrutiny from the Prudential Regulation Authority (PRA) regarding insurers’ use of offshore funded reinsurance to back these massive deals but the life insurance stress tests showed little problem (based on the PRA’s criteria). How deeply are you now looking ‘under the hood’ of an insurer’s capital structure, and has this changed how you view long-term security for your client’s members?
AG: This is an interesting area and receives focus when evaluating the financial strength of an insurer as part of the due diligence. My view is that the onward sharing of risk is up to the individual insurer. Funded reinsurance is one solution to mitigate that risk, but the extent to which they do this or via alternative methods, is the insurer’s prerogative. It is not an issue that trustees are concerned about in the majority of transactions, unless highlighted as such in the financial due diligence. Stress testing is a useful analysis to look under the bonnet, and it is an area which the PRA is scrutinising carefully. I do expect more developments in this area, from PRA and insurers, whilst it continues to receive focus.
Alan Greenlees is a Professional Trustee and Head of Risk Transfer at ZEDRA