Eyes open: what good endgame thinking actually looks like

Our twentieth annual debate ended with the vote exactly where it started — 51% against the motion, 49% in favour. A show of hands revealed that a material proportion of the audience had changed their mind after hearing the debate, but cancelled each other out. I chaired neutrally, as I always do. But it prompted me to set out, in my own name, what good endgame decision-making actually requires.

My position is not that buyout is right or wrong. It is that the decision — whichever way it goes — needs to be made properly. In a landscape that has genuinely changed, that demands more than it used to.

The landscape has changed — and the decision framework must change with it

For most of the last two decades, the destination was rarely contested: schemes were underfunded, buyout was distant, and the question was how to get there. That world no longer exists for many schemes. Funding positions have transformed. The Pension Schemes Act introduces new options around surplus and run-on. Consolidation vehicles are maturing. The policy environment is actively encouraging trustees and sponsors to think carefully rather than transact reflexively. The answer can no longer be assumed. It has to be reasoned.

Start with the members

Good endgame thinking begins and ends with member outcomes — though it is surprisingly easy for the conversation to drift towards what is administratively tidy or commercially convenient. Member outcomes should not be reduced to benefit security alone, important as that is. They also include the quality of communication and engagement, the handling of discretionary decisions, and whether the governance arrangements genuinely serve the membership.

One dimension that deserves more attention is intergenerational adequacy. DB members are widely — and rightly — seen as the fortunate ones: younger members of the workforce are not receiving the same levels of pension provision. Sponsors are acutely aware of this. Conversations about using surplus to further augment already-generous DB pensions sit in a very different place, from a sponsor's perspective, than conversations about using surplus to improve DC provision for the broader workforce. Trustees who engage with this reality will find sponsors more receptive; those who don’t may find the dialogue harder than it needs to be.

Trustees should also be able to articulate clearly how the chosen endgame path serves their specific membership. If that articulation is difficult, then the process needs more work.

Engage sponsors properly — and early

The quality of trustee-sponsor dialogue around endgame varies enormously across the industry — and poor dialogue leads to poor decisions. Sponsors carry the covenant, fund the recovery, and in many cases have a genuine long-term interest in member outcomes. Treating them as a source of cash rather than a governance partner is a missed opportunity.

One thing is clear from our conversations with CFOs: sponsors respond well when trustees arrive with a clear, considered view rather than waiting to be driven by the sponsor’s adviser agenda. Taking the initiative — coming to the table with ideas that benefit both members and sponsors, acknowledging trade-offs openly, and demonstrating that you have thought about the full picture including the broader workforce — creates a very different dynamic from the traditional deficit management relationship.

The best endgame processes are ones where trustees and sponsors have developed a shared understanding of the options and trade-offs well before any transaction is on the table. That requires honest conversation, structured engagement, and advisers — and trustees — acting with integrity, managing conflicts properly. That independence is not a nice-to-have. In a decision of this magnitude, it is foundational.

Consider the full range of options — genuinely

Run-on with surplus extraction. Consolidation. Phased de-risking. Full insurance buyout. Each carries different implications for members, sponsors, governance, and cost. The Aberdeen/Stagecoach transaction — in which an asset manager took over as the sponsoring employer of a £1.2 billion scheme, running it on to deliver immediate member uplifts and better inflation protection — is a recent example of what genuinely creative thinking can produce when trustees and sponsors approach the question with an open mind. Considering the full range does not mean treating all options as equally appropriate — for many schemes, a thorough assessment will lead back to buyout, and it will be a better decision for having been tested. The point is that the process should be real, not performative. Trustees should be comfortable asking hard questions of their advisers: on what basis is this recommendation made, what are the assumptions, and what happens if those assumptions prove wrong?

The 51/49 result is a prompt, not a verdict

The debate demonstrated that this is a genuinely contested question among well-informed, serious people. For trustees, that is both a challenge and an opportunity. The challenge is that there is no longer a default that removes the burden of thought. The opportunity is that, approached properly, the endgame decision is one of the most consequential acts of stewardship a trustee board will undertake — and one where good governance genuinely makes a difference to members’ lives.

Eyes open. Stakeholders engaged. Members at the centre. That is where good endgame thinking starts.

Further reading: For a deeper look at the changed endgame landscape and the surplus opportunity, see Lynne Rawcliffe’s ‘The game has changed: Rethinking DB endgame strategy’. For the corporate perspective on trustee-sponsor engagement, ‘Beyond buy-out: What trustees should consider when engaging with sponsor CFOs’ draws on direct conversations with CFOs. 

Do reach out to emma.sinnamon@lawdeb.com or your usual LawDeb contact to find out more about our solutions.