Risk-Benefit Analyses Show Run-On Beats Buyout

C-Suite conclusions on the Defined Benefit pension market 2026:  Coordinated regulators; actuarial work scrutinised; Government using incentives.  Then the £1.4 trillion behind DB pensions can be the catalyst for UK economic growth.
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• Strong sponsor; fully funded; fiduciary managed; discretionary surplus payments.  A great package : why give up on it?  The maths and the concentration risks can make buyout less attractive for members than run-on.  Pension protected from what and at what cost?  Without Value Sharing the Gold Standard has become the Old Standard.
• PPF safety net for run-on is an outstanding success : FSCS for buyout is politically sensitive and needs an overhaul.  Buy-ins can lose value.
• Longevity risk transfers have been costly unforced errors and have worked massively to the benefit of insurers and reinsurers – who are heavily involved in producing the longevity tables.
• No scrutiny of actuarial work for 20 years has been a disaster.
• Life insurer lobbyists are too powerful and astute for the sector’s and Government’s good (Ref Solvency UK / FundedRe).
• Exercising discretion starting now is in all stakeholders’ interests.  Important Government initiatives taken in surplus use.  Phasing payments is very attractive.
• Informed, maths led decisions by trustees bring a fiduciary duty reset favouring run-on.
• Government can add incentives for life insurers and DB schemes to have Pro UK investment strategies for gilts and productive assets.  No mandation :  Transformational for the growth agenda.
• The wave of American investment bankers may need to add Value Sharing or find the best of the £50 billion a year PRT party is over.

Ring the Bell, Torsten.  Great growth opportunity for Britain.

​C-Suite pointed out over 2 years that one question put by members to trustees will have the major impact of collapsing the case for a buyout when compared with run-on.

“Have you asked the actuary for a TAS300V2.1 report?”

The maths and governance behind risk-reward comparisons then take over.  Strategies change.  Value Sharing becomes mainstream.

To clarify the position, trustees themselves might consider asking their advisors:

• Does a buy-in or buyout have a Government guarantee to support the “complete security / certainty” sales pitch?
• Will making discretionary payments to inflation protect the real value (at least) of a pension be possible by agreement?  Where’s the value sharing arrangement sponsor and trustee have agreed?
• Why give up on discretion; sponsor; ring-fenced assets and PPF cover if there is no Government guarantee for a buyout?

“I had; I have; I will have” provides a summary of the endgame process.

Run On V Bulk Pension Annuities

2026 Analysis : Strong sponsor : Funded to low dependency : Strategy resets

An annuity was the Gold Standard.  That it provides “certainty” and “absolute confidence” is the pension sector presumption.  Life insurers trade off PRA regulations being tough and the industry having its own compensation scheme.  No Government guarantee.  FRC say the value of a buy-in can be taken as read and even covering the subject in a valuation is not proportionate.  But what is in members’ best interests?  What if the Gold Standard premise is incorrect?  Risk diversification and upside potential can provide financial benefits and peace of mind than a BPA.

Risk Analysis for DB scheme trustees, sponsors and advisors to consider:

A buy-in may remove discretion but provides additional security for accrued benefits.  Members have sponsor, insurer, PPF and FSCS back up.  That may be needed as FSCS, Bank of England states, may not cover all the value in a buy-in.  The sponsor is still liable.  A serious question for trustees then arises as why it is in a member’s interest to move from buy-in to buyout.  Could a sponsor led decision to move to buyout be later challenged by “vulnerable” members or FCA on their behalf?  Severance is a difficult word in DB pensions as PIC and Edi Truell found out over 15 years ago.

Run-on may be a lower risk option than buyout and have an upside.  Schemes have time to wait and see.