Beyond buy-out: What trustees should consider when engaging with sponsor CFOs

With the Pension Schemes Bill now close to being finalised we at Law Debenture are thinking ahead about how we engage with our corporate sponsors about what comes next for their pension schemes. To cross-check our thinking, Law Debenture has networked with numerous CFOs to listen and exchange views on the  corporate perspective with the aim of having more constructive engagements in the future. The following key themes have emerged.

Taking the initiative

The idea of trustees taking the initiative when it comes to raising the topic of how to engage with surplus has been extremely well received by our corporate clients. Rather than waiting for sponsors or their advisers to drive the agenda, trustees who articulate clear views on surplus strategy and long-term objectives are finding willing audiences.

The question of "what's next" extends beyond schemes already in surplus. Even trustees of schemes not yet in that position are beginning to explore how surplus could be used, with DC contributions funded from future surplus being seen as a particularly attractive option. 

Rethinking the ‘Gold Standard’

The traditional view of an insurance buy-out as the ultimate outcome is starting to change. The policy intent behind the forthcoming legislation is aimed not at a “one and done” surplus extraction but is placing more emphasis on gradual surplus extraction. This could look like reverse recovery plans or adjusted schedules of contributions that can support DC members. The take-away point is that there is a menu of options for sponsors and trustees alike to consider. 

The adequacy question

Perhaps most importantly, there's growing consensus around a crucial starting point: DB members are widely perceived as being the lucky ones with younger members of the workforce not receiving the same levels of pension provision. If this is the perspective of the sponsor, then conversations about using surplus to further augment existing (and generous) DB pensions are likely to be nuanced when compared to, say, using surplus for increasing DC provision. 

The path forward

For trustees preparing to engage with sponsor CFOs, the message is clear: come prepared with ideas that can benefit both members and sponsors, think beyond traditional endpoints, acknowledge intergenerational issues, and focus on practical, graduated approaches to surplus management. These conversations work best when trustees demonstrate they've thought carefully about the full member base and the scheme's role in the broader corporate context.

The future of pension scheme governance isn't just about reaching full funding or achieving buy-out. It's about thoughtful stewardship that balances member interests, corporate sustainability, and regulatory expectations, and that requires trustees to lead the conversation, not just respond to it.

To find out more about our pension trustee and governance expertise contact emma.sinnamon@lawdeb.com