Following the significant improvements in funding for defined benefit pension schemes over the last two years, many sponsoring employers and trustee boards have already reconsidered their scheme’s endgame. However, given the number of regulatory and market developments seen recently, 2025 represents an important period for schemes that have yet to commit to a particular approach and are reviewing their endgame strategy.
Paul Dooley, associate partner and head of the UK Endgame Strategy team at Aon, said: “There are a number of factors at play. Inevitably, sponsors’ and trustees’ views on the way forward are varying widely and some have now changed their outlook. For example, the government’s statement of 28 January suggested that schemes will have more flexibility in the future on how they can use surpluses for the benefit of sponsors and members. The bulk annuity market has seen change too, with four new insurers entering it over the last 18 months. There has also been innovation. The Wates Pension Scheme transaction was a landmark case in the superfund market – the first with an ongoing sponsor. And we’ve seen further developments in the pension captive space, including the recent M&G risk-sharing deal."
Given these developments, Aon has created the UK Endgame Strategy team to focus on ensuring pension schemes receive up-to-date endgame advice that is fully aligned with the scheme’s aims. The team is establishing a fresh approach to fully understanding a scheme’s objectives, using Aon’s investment in financial modelling to help schemes comprehend potential outcomes for members and sponsors.
James Patten, partner in the UK Endgame Strategy team at Aon, said: "The cornerstone of determining the most appropriate endgame is achieving a consensus with stakeholders on their joint objectives. With that in mind, Aon has developed a framework of thought-provoking questions designed to capture the various views, allowing consideration of all angles - and the right conclusion to be reached. While some sponsoring employers and trustee boards have an instinctive view on their preferred endgame, for others it can be difficult to determine. For example, it can be hard to weigh-up run-on versus risk settlement without really understanding the potential risks and rewards of a run-on strategy. For this reason, we’ve invested further in our financial modelling capability with Aon’s Pension Endgame Analyzer tool. This has additional functionality, including the ability to analyse integrating employer covenant risk and the dependencies around surplus distribution. It helps schemes make better-informed decisions about which endgame to pursue by understanding the potential outcomes for both the sponsor and the members.”
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