As the derisking options for small defined benefit (DB) pension schemes increase, experts from Stephenson Harwood and Mercer share insights on how pooled arrangements have been able to secure insurance deals for some of the smallest clients.
The bulk annuity market is no longer a slow, linear process, as anyone observing recent trends will know. Estimates from bulk annuity consultants indicate that 2025 brought a record 350 to 375 bulk annuity deals, with the small to mid-sized scheme market particularly strong across all 11 active insurers in the market.
“Transactions that previously took several months now complete in a matter of weeks,” explains Stephen Richards, head of pensions and leader of Stephenson Harwood’s ‘Derisking Pathway’ team.
The law firm believes this shift in pace is forcing pension schemes, trustee boards, and advisers to rethink how they approach derisking.
Three buy-ins in weeks, not months
Streamlined processes offered by consultants and insurers are simplifying the buy-in process, meaning straightforward transactions can be completed in a matter of weeks rather than months.
At the start of this year, Mercer’s DB Master Trust completed three buy-ins with Just Group. The transactions were led by Mercer’s risk transfer team and the independent professional trustees that oversee the master trust, with legal advice given by Stephenson Harwood.
The deals were completed in just a few weeks, illustrating how a “fast track” model can work.
“Less experienced boards can, understandably, require more nuanced and detailed explanations. But in this case, the trustees already had a sophisticated understanding of buy-ins, so we could focus on high-level decisions.”
“To maximise engagement from the insurer for the smallest of schemes, we worked with all parties to co-create a process to accelerate the path to buyout,” says Andrew Pugh, risk transfer lead for the Mercer DB Master Trust.
This collaboration helped the transactions move quickly, as it facilitated a streamlined process. This was further assisted by the collective experience of the three professional trustee firms that make up the Mercer DB Master Trust’s board: PAN Trustees, Independent Governance Group, and Zedra.
“Working with professional trustees can make a real difference,” says Stephenson Harwood’s Richards. “Less experienced boards can, understandably, require more nuanced and detailed explanations. But in this case, the trustees already had a sophisticated understanding of buy-ins, so we could focus on high-level decisions.”
An innovative approach
The trustees completed a data cleanse for each of the three sections of the master trust before entering into the buy-in contracts – an unusual step, as this is often completed after buy-in. This involved input from Mercer’s advisers and Just Group, with a workflow process agreed before further work began.
“Completing the data cleansing work up front is not the standard approach,” Mercer’s Pugh says, “but it has shortened the buy-in to buyout window, reduced the complexity of the true-up premium, and will allow us to progress more quickly to wind-up.”
This also meant the trustees had immediate clarity over the ultimate cost of the transaction – something that isn’t usually known until later in the process when data verification takes place after signing.
Pugh adds that “by transacting three fully segregated sections together we were able to capture economies of scale, securing insurer capacity and pricing that would unlikely be available to them as standalone schemes”.
A streamlined legal approach
An efficient transaction requires streamlined processes. Insurers and consultants have introduced these for small schemes over the past few years – and they are not the only ones.
“The market has changed, and so our processes have changed with it,” says Richards.
Stephenson Harwood has codified its approach to a changing bulk annuities market by introducing its ‘Derisking Pathway’. This process has been designed specifically for “fast-moving transactions”. The process uses “recycled” disclosure and reporting document templates as well as artificial intelligence tools to accelerate document review and reconciliation.
In addition, the law firm’s process and experience mean it can help establish a legal framework with consistent contracts and benefit-specification templates, reduce duplication, and increase efficiency – as well as lowering costs.
Focusing on member outcomes
Estella Bogira, partner at Stephenson Harwood and leader of the Mercer DB Master Trust projects, praised the collaboration between multiple parties to get the deal over the line.
“The whole Mercer DB Master Trust team, led by Tim Ball, and working very closely with Just, really are exceptional,” she says. “And our client, the trustees, have been outstanding – working alongside Mercer to develop a route that puts member outcomes first.”
Tim Ball, Mercer DB Master Trust lead, adds: “The Mercer DB Master Trust was built to help employers run their schemes off efficiently, but thanks to this collaborative effort we’ve also created a streamlined route for employers looking to use the master trust as a bridge to buyout.”
With every successful transaction, whatever the size, a common factor is always collaboration and cooperation between multiple parties. As more schemes approach endgame in an increasingly busy market, the options available to trustee boards are growing – making those working relationships all the more important.
