Unlocking Opportunities: How Trustees Are Navigating Surplus Reforms and Embracing Buy-in Strategies

id

The UK’s Defined Benefit (DB) pensions landscape is entering a transformative phase. With the Government’s Pension Schemes Bill aiming to unlock scheme surpluses, strong funding levels driving record buy-in activity, and recent market activity such as the recently announced Aberdeen transaction, trustees are facing critical and hard decisions that could reshape their long-term strategy. Standard Life’s latest research offers a snapshot of trustee sentiment—and reveals both the challenges and opportunities ahead.

Surplus Reforms: A Mixed Picture

The Pension Schemes Bill seeks to give DB schemes greater flexibility by enabling surplus release, supporting member outcomes and broader economic growth. Yet confidence among trustees remains divided. Our research shows that nearly two-fifths (39%) of trustees are concerned that the proposed reforms may not serve members’ best interests, while only 32% feel comfortable with the reforms and a further 29% remain undecided.

This uncertainty reflects the complexity of surplus extraction decisions. Trustees must weigh fiduciary duties against sponsor expectations and a developing legislative landscape. When asked how surpluses might be used, responses varied widely:

• To enhance member benefits: 38%
• To support sponsor business growth: 38%
• To reduce employer contributions: 35%

Claire Altman, MD – BPA & Individual Retirement, explains: 

“Trustees are right to be cautious. A developing legislative landscape and shifting market conditions make surplus extraction decisions complex. Confidence that actions align with members’ best interests remains paramount.”

Buy-In: The Clear Front-Runner

While surplus reforms spark debate, trustees are pressing ahead with strategies that deliver certainty.

Nearly half (48%) of DB trustees favour a bulk purchase annuity (BPA) as their endgame, with 40% planning to approach an insurer within the next 12 months. Meanwhile, only 25% of schemes are considering a natural run-on strategy, and 12% are exploring combined approaches. Superfunds remain niche at just 3%.

Market activity reflects this view: UK BPA volumes are expected to exceed £40bn for the third consecutive year, with a record number of transactions also expected.

The overwhelming preference for insurance-based solutions underscores the value trustees place on certainty and risk reduction. Over a third (34%) of trustees cite “certainty that members will receive their pension income” as the most important reason for choosing buy-in. 

Altman adds:
“Buy-in isn’t just tactical—it’s strategic. It locks in member benefits and removes uncertainty. With nearly half of schemes fully funded, insurance-based solutions are more accessible than ever.”

Why Trustees Are Acting Now

The momentum behind buy-ins is not surprising. Trustees are navigating a volatile environment where market conditions, sponsor covenants, and longevity assumptions can shift quickly. For many, securing benefits now outweighs the potential upside of waiting for further clarification of the legislative position and further innovation to emerge.

The Road Ahead

Surplus reforms under the Pension Schemes Bill are unlikely to take effect until late 2027, giving trustees time to plan. Decisions made today will shape outcomes for decades. 
For schemes in surplus, many trustees are facing into questions about strategy and whether for those that can, acting now to secure member benefits is the right thing to do, as pricing remains as favourable as it ever has. For many, buy-ins offer a proven route to certainty and risk reduction. As Altman notes:

“These decisions are not easy at the best of times, but they are even more challenging when legislation and the market place is evolving. We look forward to TPR’s guidance to trustees to help them deliver to their primary objective of securing benefits under the scheme and how to weigh the benefits of certainty against other factors.”

Key Takeaways for Trustees

• Confidence gap: 39% of trustees are uncomfortable with surplus reforms; only 32% feel confident.
• Buy-in dominance: 48% favour BPA as their endgame; 40% plan insurer engagement within the next 12 months.
• Funding strength in terms of buy-out: 45% of schemes are fully funded or in surplus, creating opportunities for de-risking.
• Diverse expectations: Surplus use priorities split between member benefits, sponsor growth, and contribution reduction.

Looking Forward

The evolving DB landscape presents both challenges and opportunities. Trustees who act decisively—whether by locking in buy-in deals or preparing for surplus flexibility—will be best positioned to deliver secure outcomes for members and sponsors alike.

Want to explore the full research insights or discuss your endgame strategy? Contact Standard Life’s team today.

 

*Note: Research conducted by Incisive Media on behalf of Standard Life in August 2025 amongst 100 DB Pension Scheme Trustees, of Schemes larger than £100m