A shifting landscape in pension scheme transactions
The UK has seen a marked increase in pension schemes completing buy-out transactions. These deals, which transfer pension liabilities from trustees to insurers, are reshaping the investment landscape and introducing new systemic risks. While a buy-out can offer security and finality for schemes, they also mark a critical transition point - one where trustees relinquish control over the assets and the stewardship principles, they have long championed.
For years, trustees have embedded sustainability into their investment strategies, setting clear stewardship priorities and pushing for responsible asset management. However, at the point of risk transfer, that influence ends. Trustees must ensure the values and principles they upheld during their tenure continue to be reflected in the post-transaction environment.
Beyond price: A new set of priorities
Historically, the primary driver in selecting an insurer for a buy-out has been price. However, this is beginning to change. With many schemes now in stronger funding positions, the need for employer top-ups has diminished. This financial stability gives trustees the freedom to consider other critical factors - such as member experience, cultural alignment, and environmental, social, and governance (ESG) credentials.
This is the last opportunity for trustees to push for full transparency. They need to ask how members will be treated, what the experience will look like post-transaction, and how the insurer’s sustainability commitments are evidenced - not just promised.
The power of questions
Trustees must use their voice. By asking the right questions and demanding concrete data, trustees can influence insurer behaviour and drive positive change across the market. This includes probing insurers on how they manage ESG risks, how they report on sustainability metrics, and how they plan to maintain or improve member services.
The more trustees focus on these issues, the more insurers will be compelled to respond with substance. This, in turn, can elevate standards across the industry, ensuring that member outcomes and long-term sustainability are closely considered by insurers.
A call to action
Trustees are uniquely positioned to act as stewards of both financial and ethical responsibility. As they approach the final stages of their fiduciary journey in a buy-out, their influence - though time-limited - can be profound.
Trustees should:
- Demand transparency: Insist on clear, data-backed evidence of how insurers will manage member outcomes and sustainability.
- Move ESG up the priority list: Evaluate insurers not just on financial strength, but on their commitment to responsible investment and long-term impact.
- Champion member experience: Ensure that the transition enhances, rather than diminishes, the quality of service and support members receive.
- Use their leverage: Recognise that this is a critical moment to shape the future - both for scheme members and for the broader pensions ecosystem.
In conclusion
The rise in pension buy-outs presents both opportunities and risks. Trustees must not view the transaction as the end of their responsibility, but rather as a final, powerful moment to advocate for the values they have upheld throughout their stewardship. By holding insurers to account on sustainability and member outcomes, trustees can help ensure the legacy they leave behind is one of integrity, foresight, and care.
Kim Nash, Managing Director – ZEDRA Governance
