The DB endgame landscape has changed. Is your thinking keeping up?

Our twentieth annual debate asked whether buyout remains the gold standard for DB schemes. The very close 51/49 vote (marginally against the motion) — unchanged before and after four outstanding speeches — told its own story: this is not a question the industry has resolved. It is one being actively worked through, against a backdrop that has shifted more fundamentally in the last three years than in the previous two decades.

The funding picture has transformed

Rising interest rates and gilt yields have dramatically improved the funding positions of most UK DB schemes. Many that were significantly underfunded are now in surplus, and some are approaching buyout funding levels. The endgame timeline has compressed, sometimes dramatically: boards and sponsors that expected another decade of deficit recovery have found themselves at the point of decision far sooner than anticipated. Endgame strategy, deferred as a future problem, has become an immediate governance priority.

The legislative environment is evolving

The Pension Schemes Bill introduces new provisions around surplus extraction, scheme funding, and run-on — giving trustees and sponsors more structured options for what happens to well-funded schemes. The direction of policy travel is clear: thoughtful engagement with the full range of endgame options, rather than defaulting to the path of least resistance. That is not a policy argument against buyout — it is a policy argument for rigour. The distinction matters.

The options available to schemes have genuinely broadened

For much of the last two decades, buyout was the destination; the only question was how to fund the journey. That framing is now outdated. DB consolidation vehicles have developed and received authorisation: Clara has completed five scheme transfers, more superfunds are expected to enter the market, and a permanent regulatory regime is now in place. Run-on, supported by new surplus flexibility provisions and encouragement from the Government, is being taken seriously by well-funded schemes with strong sponsors. And within the insurance market, innovation continues — value-share structures and deferred premium arrangements are expanding what is possible beyond traditional bulk annuities.

A landmark example of the new landscape in practice is the December 2025 transaction in which Aberdeen Group became the sponsoring employer of the £1.2 billion Stagecoach Group Pension Scheme. Rather than proceeding to buyout, the well-funded scheme continued under a run-on structure — delivering an immediate pension uplift for 22,000 members, better inflation protection, and the prospect of further increases through investment in productive assets, while giving Stagecoach a clean break from its DB obligations.

Not all of these alternatives will suit most schemes. But the existence of a genuine menu changes the governance obligation: trustees can no longer assume buyout is the answer without demonstrating they have considered the alternatives and made a reasoned choice.

The role of the sponsor has moved to centre stage

For much of the DB era, the trustee-sponsor relationship was structured around deficit management. That framing is increasingly incomplete. Where the question is no longer whether the scheme can survive but what it should do next, the sponsor's perspective becomes genuinely important. Sponsors may have legitimate interests in run-on — whether for surplus-sharing, balance sheet, or workforce reasons — and views on timing, cost, and structure that deserve to be engaged with.

The best endgame outcomes I see are ones where trustees and sponsors have developed a shared understanding of the options, collaboratively and well before any transaction is on the table. That requires a quality of dialogue that not every board has established.

What this means in practice

The changed landscape does not produce a single answer — different schemes, sponsors, funding positions, and membership profiles will reach different conclusions. What it does produce is a higher bar for the quality of the decision-making process. Endgame decisions made on the basis of habit or commercial pressure rather than reasoned governance are increasingly hard to justify to the members whose interests are at stake.

Our debate did not resolve the gold standard question. What it demonstrated is that the industry is grappling seriously with something that has become both more urgent and more complex. In my next article, I set out what good endgame decision-making actually looks like in practice.

Further reading: Lynne Rawcliffe, Head of Law Debenture’s Endgame Solutions Working Group, explores the changed landscape and the surplus opportunity in ‘The game has changed: Rethinking DB endgame strategy’. And for the corporate perspective, ‘Beyond buy-out: What trustees should consider when engaging with sponsor CFOs’ draws on direct conversations with CFOs about what they want from this conversation.