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:

• What is the value at risk to scheme members from which a bulk transfer protects you and what is the probability of needing protecting?  PPF gets stronger and stronger and the no Government guarantees, FSCS becomes more uncertain as new owners arrive.
• Should the exercise of discretion be given away for nothing as surpluses become more readily available?  What about value sharing?
• Why have virtually all longevity risk transfers cost schemes large sums?
• When the magic (fairly close) matching adjustment lets insurers re-risk, why are schemes still selling out (in cash) liabilities calculated at gilts plus a slither of return?
• The PRA now recognises funded reinsurance let primary insurers make instant profits on £40 billion.  The capital required was too low.  Gosh.  How did that happen?
• Is it wise for PRA to give our new international private debt friends a 2 year head start in how to operate its “investment accelerator”?
• The 2025 Life Insurer Stress Tests showed a really well capitalised UK market – thanks to the sector’s remarkably profitable business streams (see Aitken’s work).  New business strain can be as low as 2% of premia.  Not much stress on balance sheets.  North American private equity is not known for leaving surplus capital lying around.  Will it be a “stable door” job when LIST returns in 2028?
• By 2028, new rules on surplus use will be in place – guardrails and all.  Will exercising discretion be fashionable amongst those with a completed Technical Actuarial Standard 300 V2.1 Report?  What’s the upside?

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:

• The Silent Tailwind: How Falling Life Expectancy Has Powered UK Insurers  (Provision releases linked to use of IFoA / CMI tables contributed 20% to life insurer operating profits. And that excludes reinsurers’ profits)
• Private capital is moving into bulk annuities: what it means for listed insurers  (Stories about red and grey squirrels)
• Is Standard Life about to trade 20% IRRs for a re-rating?  (Misunderstood so long it gave up)
• The regulator doesn’t do favours, this time it did.  (FundedRe: Too generous)
• 27 years on: is L&G back in play?  (The next domino?)

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.

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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.