 Buy as Shareholders. Avoid as DB Schemes without Value Sharing
Gordon Aitken’s work is brilliant on the pension risk transfer market. Buy UK life insurers – while stocks last. They have a terrific business model and a highly supportive regulator. North American private capital recognise great value when the see it. And they are taking over. UK equity investors shrug. Perhaps pension regulators need to coordinate better outcomes for all stakeholders. Aitken’s work is also a “must read” for UK DB pension scheme trustees and their advisors contemplating risk transfers. And then they can ask themselves, as you have to, some relevant questions:
And with the answers to the questions, perhaps schemes should say “avoid” for now to Bulk Pension Annuity deals. Wait and see – certainly until life insurers are ready to share value over time. Who’s Winning in the Bulk Annuity Carve Up? Regulatory Menu Updates Needed Gordon Aitken is a vastly experience insurance company financial analyst. He has produced recently some quite outstanding work covering the arrival of large, North American groups in UK pension risk transfer market. It concludes: “Five of the most sophisticated long duration capital allocators in the world have looked at the UK BPA market and concluded it is worth real money”. Aitken notes the new wave of global investors prefer to be involved with DB rather than DC. Go with the big numbers. There is still over £1 trillion to play for. Put off by the insurance Black Box, UK equity investors shrug. Regulators have been remarkably accommodating. The improved Solvency UK “matching adjustment” is magic in how it can shrink liabilities and grow returns. His message is that “funded reinsurance” was one concession too many to international life insurers able to originate fixed income assets with their associates. It favoured Bermudan based groups over UK listed groups and distorted competition. PRA recognised instant profits were made by insurers. What do these analyses tell you about the UK quoted insurers’ valuations and about coming frictions and factions in the life insurance industry? Will L&G remain independent? Best read the Aitken research. What could be added to the work for those less committed to the insurance market is that it’s high time for UK DB schemes to be more sceptical before handing over value to a global private capital led industry. PRA first spoke 3 years ago about gluttony being an issue for life insurers. Too rich a diet of DB schemes being available might not be healthy. It’s been quite a carve up since Solvency UK and funded reinsurance added extra spice. Now the Bermudans have arrived with new, sophisticated recipes. The regulatory coordination the Government promised during the passage through the Lords of the Pension Schemes Act 2026 could prove useful. PRA’s desire for “moderation in all things” perhaps requires a menu update of improved disclosures and transparency. And fair shares for all stakeholders. Be ready to exercise discretion. Joining PRT dinners is not compulsory. Run on beats buyout for members and sponsors. Sign up for Gordon Aitken’s Analysis: With “on the money” cartoons and graphics:
FT’s Lex column picked up on Aitken’s analysis of Standard Life. Life insurers are the smart money. Leaving it to them is for the best. But a health warning may be needed. FT has also written up comprehensively on anxieties over private credit. Members, sponsors and trustees should be pretty keen to have a new, coordinated, risk-benefit regulatory menu setting out the ingredients in case of allergies. Ministers recognise importance of TAS300V2.1 and regulatory coordination. C-Suite backing for Altmann / Bowles Amendments to Pension Schemes Bill 2026.
Debates in the House of Lords on the Pension Schemes Bill 2026 raised the profile of TAS300V2.1 and showed a breadth of interest in the need for quality actuarial work. --------------------------------------------------------------------------------------------------------------------------------------------------------- C-Suite has seen TAS300V2.1 as the trigger for substantive change to DB strategies. Baroness Altmann pressed the case for effective implementation in Amendments to the Pension Schemes Bill in the Lords. Baroness Sherlock in responding recognised its importance and promised regulators would coordinate their work. TAS300V2 has been a requirement on actuaries advising on bulk transfers since April 2024. It requires a comparison with run-on and other Credible Alternatives. The ramifications are considerable and are yet to be fully absorbed by the pension industry. TAS300V2.1 was issued in November 2025. It came after a consultation which specifically addressed surpluses and how their use links to the strength of the covenant and to the scheme’s Funding and Investment Strategies. TAS300V2 (April 2024) requirement for a bulk transfer v run-on comparison came from the work of then Chancellor Jeremy Hunt and then Secretary of State for Work and Pensions, Mel Stride. They wanted run-on strategies to further their plans for higher long term UK investment levels. These themes have been picked up by the current Government. It has consulted with the sector and is to introduce measures to make run-on strategies more attractive. Regulators have been instructed to consider the growth agenda. Changes to Authorised Payment rules make discretion easier to exercise. PPF coverage has been increased. Restrictions on use of surpluses are being eased. TAS300V2.1 is issued by the regulator responsible for actuarial work the Financial Reporting Council (FRC). FRC does not have the resource to scrutinise work being carried out. Government has promised closer coordination between regulators. Coordination between TPR and FRC could see reference to TAS300V2.1 included in requirements of schemes in their Funding and Investment Strategies submitted to TPR under Occupational Pension Schemes (Funding and Investment Amendment) Regulations 2024. Key statements relating to run-on strategies are set out below. Changing Public Policy The Chancellor and DWP Secretary of State wrote to CEOs of TPR and PRA in December 2023 following the Autumn Statement: “Encouraging alternatives to DB de-risking and buyout, where schemes are well-funded with strong employer covenant – making their assets work harder and enabling continued investment in a broad range of assets, through clearer funding standards in Regulations, a Code of practice and guidance, and making it easier to share investment returns between sponsors and scheme members.” CEO of The Pensions Regulator issued an update in May 2024: “Scheme surpluses is a hot topic amongst schemes, corporate and members. Buyout is no longer seen as the only option. There is no clear cut answer for us as a regulator to give trustees. It is for them to act in members’ interests. Trustees must now be able to weigh up different risks and opportunities for members – understanding not just risk tolerances but commercial consideration to get the best possible outcome for members.” The current Government has repeatedly made clear its support for long term investment in the economy with DB schemes taking an important role. Government Consultation Response: Options for Defined Benefit Schemes: Updated 29 May 2025: “7. The changes to surplus sharing will give trustees of DB pension schemes access to their surplus to benefit both employers and members. Employers could use this funding to invest in their business, increase productivity, boost wages or utilise it for enhanced contributions in their Defined Contribution (DC) schemes. Schemes could also use funding to unlock increased benefits for scheme members, including through providing discretionary benefit increases. The Pensions Regulator (TPR) has acknowledged in its most recent funding statement that schemes are facing increased calls for such increases.” In responding to Amendments to the Pension Schemes Bill in March 2026 in the House of Lords, Baroness Sherlock said: “The noble Baroness, Lady Altmann, is right to home in on the underpinning goal of these amendments. We want to make sure that trustees continue to take advice on the potential options for their schemes and keep the scheme’s strategy under regular review. To ensure this, we will continue to work with TPR as it reviews and updates its guidance. We will also engage bodies such as the FCA and, where appropriate, the PRA and the FRC, to ensure alignment across all guidance relating to consideration of alternative options.” TPR CEO Nausicaa Delfas, in an address to Association of Consulting Actuaries in April 2026, referenced: “the opportunity in running schemes on well where appropriate and delivering better outcomes for members while releasing capital for productive investments in the wider economy.” “We need trustees to be able to ask the right questions in an increasingly sophisticated environment.” TAS300V2.1 Extracts 5 Bulk transfers P5.1. Practitioners providing advice to a governing body or an employer which is considering a bulk transfer must consider the following: a. credible alternatives to the potential transaction for the long-term provision of members’ benefits. Practitioners must consider whether the following alternatives are credible: a bulk transfer to a superfund or an insurer and retaining the liabilities within the existing pension scheme potentially with additional funding and/or security; b. any material impact on the protection provided for members’ benefits in the event that the benefits are unable to be paid as intended; c. any changes in the material risks to the benefits of the different classes of members; and d. any changes to the governing body’s ability to make decisions which affect the level of members’ benefits. P5.2. Practitioners providing advice to a governing body or an employer which is considering a bulk transfer must use as much relevant information as is sufficient and must make use of support from third parties where they judge it necessary in order to obtain sufficient relevant information. Practitioners who have relied on input from a third party should understand how the input affects the output of their technical actuarial work. Scope and Compliance Technical actuarial work in connection with a bulk transfer of assets and liabilities to another pension scheme, an insurer or a superfund, including technical actuarial work where it may reasonably be expected that the decision of the intended user might lead to the pension scheme making a bulk transfer, even if the technical actuarial work is carried out at around the time of, and in connection with, an exercise which is not a bulk transfer. P1.7 Actuarial information that is material must include a statement by the practitioner confirming compliance with TAS 100 and TAS 300. Any material caveat, qualification or limitation in that statement must be justified to the intended user. The evidence demonstrating compliance must be available to the intended user, if requested. Straightforward Amendment would have major impact on financial decisions
Baroness Altmann’s Amendment to ensure actuaries work to compare bulk transfers with Credible Alternatives ahead of trustees making surplus payments to sponsors was heard. Amendment 33: Clause 10, page 11, line 22, at end insert-- “(ca) requiring the relevant actuary to confirm that work to comply with Technical Actuarial Standards issued by Financial Reporting Council on risk transfer processes has been completed.’ Member’s explanatory statement: This amendment will ensure that prior to a surplus payment being made the trustees and sponsor have considered the impact on bulk transfer and run-on strategies currently required under TAS300V2.1 P5 other financial considerations for the scheme and the sponsor. The Amendment is significant because with the data for a risk-benefit assessment generated by the work of the actuaries, the decision of stakeholders are likely to change. In the debate, the Minister Baroness Sherlock said that FRC and TPR would ensure that the work and Technical Actuarial Standards were aligned. She said that the Amendment was not needed because the requirement set a long term strategy. TPR would expect trustees to take professional advice from their actuaries on it. Baroness Altmann Baroness Altmann is a former pension minster and a recognised expert on investment and later life issues. (Non-Affiliated) “My Lords, I hope that noble Lords will understand as I go through my remarks that I believe my Amendments 33 and 33A are incredibly important to the future of defined benefit schemes and the aims of the Bill.” ………… “There is no standard calculation methodology, but the DWP regulations that were changed recently require trustees to set funding and investment strategies. In my view, TAS 300, as it stands, should be part of that. Before any surplus is paid out, or a decision to buy annuities, enter a superfund or change sponsor is made, a proper risk assessment should be carried out looking carefully at the downside risks of any potential move versus the upside potential. The actuarial calculations to quantify these, which are specified in the Financial Reporting Council’s technical standards, do not necessarily become applied, and there are regulatory gaps. The technical standards require actuaries to provide TAS 300 comparative advice, but it is not clear how, when or whether the trustees must consider them.” ……….. “But, even today, there is no consistency, no agreed pro forma, no standard template and no detailed implementation guidance, even, from the Financial Reporting Council or other bodies.” ………… “There are seven regulators reporting to three government departments. The Pensions Regulator and the PPF report to the DWP; the FRC and the CMA to the Department for Business and Trade; the PRA and the FCA to the Treasury; and the Institute and Faculty of Actuaries is self-regulating. These regulators need to work together to address this massive pool of assets and national wealth. My amendments are an attempt to help this integration and move it along.” ………… “I argue that proper use of the TAS 300 exercise could help the surplus be used for nationalk investments, for improving member benefits and for improving the resources of corporate UK.” It is estimated that the scheme assets which are currently being transferred to insurers are invested in such a low-risk manner that their aim—this is the Pensions Regulator’s recommended strategy for low dependency to attain a return of gilts plus a half or so—as soon as the insurer takes these assets in, is to re-risk, invest in other assets, and sell the gilt and aim for a return of gilts plus, say, one and a half. Every £1 billion of assets transferred to an insurance company is the equivalent of about £200 million of scheme assets that are not going to members or employers but are transferring offshore. Stagecoach, which uses this TAS 300 exercise, actually managed to justify changing the sponsoring employer, while enhancing member benefits and paying extra out in surplus. That could be the way of the future if we get away from the current obsession, which states that the no-risk option is annuities and everything else is risky. This is a huge amount of money. These schemes have changed fundamentally. The outlook has changed fundamentally: we are no longer worried about deficits and employer covenants. We should be talking about using this national pool of wealth to boost Britain.” ………… “I thank John Hamilton, who is the Stagecoach group pension fund chair of trustees; William McGrath, founder of the C-Suite Pension Strategies; and Henry Tapper, chair of AgeWage, for bringing this to my attention—that, if we can get this working right and if this is inserted into the Bill, we will be able to change how trustees look at their responsibilities to members for the long run. We will be able to start to use these pension assets in a positive way to secure better benefits in future for their members and the nation than the current haphazard application of the standards and all the excellent hard work that the actuaries do, which is driving trustees away from one of the most productive futures for this national pool of wealth.” Lord Davies of Brixton Lord Davies is a Labour peer and actuary. He has long been prominent with TUC. ……….. “We should consider ways of strengthening trustee consideration of the way forward, whatever it is. More specifically, an automatic response to go to annuitisation is clearly wrong. If trustees do not consider the other options, they are not acting properly and are not discharging their fiduciary responsibility. The suggestion is that this is happening too often at the moment.” ………. “Technical standards, such as what should be in a valuation report, are the responsibility of the Financial Reporting Council, a completely separate body that is not part of the actuarial profession.” ………. “It is also important to understand that the current edition of TAS 300 was issued after extensive consultation last July and came into effect only on 1 November last year.” ………. “The issue can be raised with the FRC, and it may well be that it should have been raised more often, because that is really the first port of call if you think that the advice is wrong. It is not to put it into a piece of legislation.” ………. I recognise the problem, but I am not convinced that we have been presented with the correct answer. Lord Fuller Lord Fuller is a Conservative peer. He is a businessman and was a leader in local Government in Norfolk. ………. “It is perverse that the entire regulatory advisory industry is mandating schemes to go into overly prudent investment products, almost suckering them down so that they have to pay a premium to be bought out, and all the profits go somewhere else. That is not prudence; it is short-changing the members of the schemes and diverting huge amounts of productive capital for the engine of our economy and the private businesses that generate wealth and pay taxes.” ………”this amendment shines a light on it almost for the first time in the Bill. Trustees in as many schemes as I can think of are being misdirected, ostensibly to reduce risks. But they are not reducing risks; they are reducing the sustainability of their schemes and their ability to pay for today’s members” ………. We need to strengthen and empower our trustees to play their roles simply and straightforwardly and not as though they are not competent or do not feel confident to resist the so-called advice they are getting from regulators, which are acting in groupthink and not in the scheme’s best interest, or the interests of either members or companies.” Viscount Younger of Leckie Viscount Younger is a Conservative peer who was parliamentary Under-Secretary of State for Work and Pensions. “My Lords, we understand that these amendments are doing something that is really quite straightforward and, in our view, sensible.” ………. “Surplus extraction ought to sit within a wider assessment of the scheme’s long-term direction, the securities of members’ benefits and the financial implications for both the scheme and the sponsor. Requiring confirmation that this work has been done would help anchor surplus decisions in that broader context. This has been a very brief speech from me. We see these amendments as a proportionate safeguard, reinforcing good governance and ensuring that surplus payments are considered alongside—not divorced from—the scheme’s long-term endgame strategy.” Baroness Sherlock Baroness Sherlock is Parliamentary Under-Secretary of State House for Work and Pensions. ………. “The 2024 funding code is scheme-specific and flexible. Even at significant maturity, schemes can still invest in a significant proportion of return-seeking assets, provided that the risk can be supported.” ……….”after the funding regime code was laid, the FRC consulted on revisions to TAS 300 covering developments; it has now published the revised TAS. These are complex decisions. Regulators need to work together. ……….”these amendments are not needed because trustees are already required, under the funding and investment regulations, to set a long-term strategy for their scheme and review it at least every three years; that strategy might include a risk transfer arrangement.” ………. TPR would expect trustees to take professional advice from their actuarial and legal advisers; to assess the sponsor covenant impact when considering surplus release; and to take into account relevant factors and disregard irrelevant factors, in line with their duties.” ………. “ Alongside the Pensions Regulator, we will work with the FRC to ensure that TAS stays aligned.” Baroness Altmann ………. “This environment of higher inflation risk, excessive prudence and hoarding of surpluses is damaging pension adequacy. The de-risking overshoot has sucked innovation, energy and impetus out of the pension system and the economy.” “There is no lobbying for either improving member benefits or giving a lot more money back to employers at the moment. If we were able to get an amendment such as this one into the Bill, so that everybody must consider the range of available options plus innovative strategies, I would hope that the outcome of the Bill would be much better, more productive use—which is the aim of the Government: the Minister, Torsten Bell, has rightly talked about using surpluses in a productive manner. The FSCS backs annuities. It has no government guarantee. I hope that, on Report, we may come back to the spurious safety of the current recommended future for this enormous amount of assets and find ways in which the Bill might be able to accommodate the need for a mindset change in this connection.” Comment Baroness Altmann provided a forceful explanation of how much better pension provision could be with straightforward adjustments in statute leading to material change to mindsets. Baroness Sherlock drew out that there will be alignment between TPR and FRC regulation to ensure TAS300V2.1 requirements are met. The impact on the real value of pensions and on UK growth strategy is material. Pressing now to ensure the policies can work in practice is of great relevance. Still to be debated is the following Amendment: Amendment 219A: After Clause 119, insert the following new Clause— “Alignment of regulations with Technical Actuarial Standards The Secretary of State has a duty to ensure that regulations under this Act align with Technical Actuarial Standards issued by Financial Reporting Council, requiring trustees to compare bulk annuity, superfunds and run-on strategies for defined benefit pension schemes before making irreversible decisions about scheme assets.” Member's explanatory statement: This amendment seeks to ensure a joint approach between Government departments and their related regulators including the PRA, FCA and TPR, to help align their respective responsibilities for solvency, consumer interest, member protection and promoting growth. Pension Schemes Bill Amendments Help Facilitate Long Term Investments and Better Pension Provision14/1/2026
House of Lords in Grand Committee may on 14th January consider two Amendments brought by Baroness Altmann which link actuarial work firmly into trustee processes:   The consequence of the Amendments would be to ensure that high quality data is presented to trustees ahead of making decisions on the future of the scheme. The options to run-on with higher UK productive asset allocations and to ensure there is value to share between stakeholders will be central to their analysis.
There have long been concerns that actuarial work receives insufficient scrutiny. These Amendments mean all parties will look again at how they are ensuring options are carefully assessed. The Amendments ensure the public policy intentions of successive Governments are met:
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Registered in England and Wales
Company No. 09974973