Outlook 2026: The changing face of DB endgame options

Whether it’s deciding what to do with a funding surplus or plotting a path to an insurance transaction, there are more options than ever open to defined benefit (DB) pension scheme trustee boards.

As legislation evolves and these options become clearer, 2026 promises to bring a set of new (and some old) challenges. We asked several DB sector experts their views on what the next 12 months could hold.

Click on the question to jump to the responses.

• What’s the biggest challenge facing the DB sector next year?
• What is the biggest opportunity for those in the DB sector in 2026?
• Will the growing number of endgame options reduce the volume of ‘traditional’ bulk annuity deals in the next few years?

What’s the biggest challenge facing the DB sector next year?

Tess Page, UK wealth strategy leader at Mercer: “Poor quality member data not only creates risks around the payment of benefits, but it can also be a major barrier to getting a good price on an insurance transaction, as the insurer will not want to risk surprises in the data. Projects such as the implementation of pensions dashboards and GMP equalisation will also be very hard work with poor data.

“Pension schemes face a growing array of cyber threats that can put member data, scheme assets and overall trust at risk. These risks are real. High-profile attacks are becoming common and, as cybercriminals grow more sophisticated, it is essential for trustees and scheme managers to understand these risks and take proactive steps to protect their schemes.”

Maggie Rodger, co-chair of the Association of Member Nominated Trustees (AMNT): “There will be a lot of effort put into absorbing all the changes and endgame choices and, as superfunds gain traction, there will be even more choices including how to use surplus either while running on or as we approach the end. For open schemes, sustainability and long-term asset strategy will be key considerations.”

Jon Forysth, chair of the Society of Pension Professionals’ (SPP) DB committee: “Perhaps the biggest challenge is sector bandwidth, given the amount going on. The Pension Schemes Bill brings a number of developments – surplus release, superfunds, and the Virgin Media issue – and there are plenty of other innovations and changes happening as well, plus legacy issues like GMP equalisation still on the go in many cases.

“For many trustees this makes it a challenge to find the time to do everything they need to do to meet requirements, while also having the capacity to take a step back and think strategically about the next steps for their schemes.”

Jill Ampleford, partner and head of trustee consulting at LCP: “The biggest challenge is likely to be the growing number of schemes that have completed full buy-ins but remain stuck in the long tail to buyout and wind-up.

“Insurers have written record volumes of transactions in recent years, and this surge in activity combined with operational pressures across administrators means that schemes can find themselves in an extended holding pattern… The key challenge for 2026 will be maintaining momentum without being overwhelmed by regulatory, operational, and market-capacity constraints.”

Tom Seecharan, co-head of origination at PIC: “While market volatility has generally affected schemes in a positive way in recent years, this won’t necessarily always be true, and the potential for poor outcomes for members remains. As we head into 2026, therefore, the biggest challenges will be a number of themes that affect how quickly and securely schemes can get to a fully de-risked position.

“In particular, capacity constraints around completing preparatory projects (such as data cleansing, GMP equalisation, and benefit audit), as well as regulatory uncertainty and expanding endgame options delaying decision making and reducing the security of members’ benefits over the longer term.”

What is the biggest opportunity for the DB sector in 2026?

Jill Ampleford (LCP): “We expect a wider range of endgames to become more mainstream over 2026. This presents a huge opportunity for DB trustees and sponsors to review long-term objectives, spurred on by the requirement under the new Funding Code to have a statement of strategy.

“The DB superfund market is fast developing, with Clara reaching its fourth transaction in 2025 and new entrants, such as TPT, expected over 2026. This has resulted in an increasing number of schemes considering this route, which potentially can allow sponsors to transfer schemes off balance sheet at a lower cost than insurance and possibly increase benefits to members.”

Laura McLaren, head of DB scheme actuary services at Hymans Robertson: “2026 is set to be the year we see how policy and market shifts begin to shape strategy across pension schemes, and whether they translate into meaningful change. We expect many schemes will reassess long-term objectives.

“By taking a purposeful pause, schemes can ensure they are moving in the right direction in an endgame environment that is more flexible than ever, from run-on strategies and insurance, through to superfunds and other emerging solutions. This can be underpinned by a growing focus on delivering the best outcomes and experience for members. The new funding code will raise the bar, driving deeper conversations on long-term plans. We’ll also see more action as trustees move towards implementing plans.”

Jon Forsyth (SPP): “The innovation in the endgame space presents lots of opportunities for improving outcomes for members and sponsors. On a related note, the proposed new flexibilities to release surplus from ongoing DB schemes offer employers the potential for quicker and larger access to surpluses, members could receive pension uplifts in return, and the UK exchequer could see higher tax revenues and increased investment in the wider economy.”

Tom Seecharan (PIC): “With surplus positions remaining strong alongside historically attractive pricing and insurer capacity, there is an opportunity for many schemes to complete their de-risking journeys and achieve security for their members. With projections pointing to buy-ins of up to £550bn over the next decade, we expect 2026 to be a very busy year for the pension risk transfer market, with technology, increased asset sourcing capabilities, and investment in the market combining to expand what’s possible.”

Tess Page (Mercer): “Artificial intelligence (AI) offers potential benefits for DB schemes, albeit with some risks. Some schemes are already using AI to drive efficiencies in how they operate, from administration work to AI-produced first drafts of meeting minutes. Machine learning algorithms can also analyse large volumes of pension-related data to identify trends and provide more dynamic and responsive ways to manage risks. For example, they may help to predict behaviours around members taking different options from their scheme.”

Maggie Rodger (AMNT): “There will be challenging conversations around the use of surplus. But this will give the opportunity to make some discretionary increases to help members absorb recent large inflation increases and acknowledge their contribution towards deficits, as well as returning some deficit funding to sponsors. One-off payments will be very helpful in this space.”

Will more endgame options reduce the volume of ‘traditional’ bulk annuity deals?

Jon Forsyth (SPP): “It could have an impact, but it seems unlikely that bulk annuity volumes will reduce, more that they might increase by less than they otherwise might have. For many schemes, buyout will remain the choice that best meets their objectives, and the bulk annuity market is likely to remain very buoyant. But it is certainly true that more schemes are now actively choosing non-buyout endgames, run-on is rising in popularity, and funding level improvements provide schemes with breathing room to contemplate alternative options.”

Charlie Finch, partner in the risk transfer team at LCP: “The growing range of endgame options is broadening strategic choice for trustees and sponsors, but, in our view, it is unlikely to materially reduce appetite for traditional bulk annuities. Demand for bulk annuities is anchored in strong funding positions, highly competitive insurer pricing, and the regulatory certainty that buy-ins provide… It would require a meaningful increase in other endgame options to make a significant dent in bulk annuity volumes.

“That said, we do expect run-on models and emerging solutions such as DB superfunds and the Stagecoach-Aberdeen structure to increasingly divert a subset of schemes with different priorities. We believe these alternatives will shape the wider market, offering credible routes for schemes not yet ready or able to transact with insurers, but they will complement rather than displace the mainstream bulk annuity route.”

“Schemes potentially taking longer to reach the point of approaching the insurance market are leading to attractive pricing levels for those that are choosing to insure.”

Tom Seecharan, PIC

Tom Seecharan (PIC): “Over the last decade, buyout capacity has grown steadily, and competition has helped drive innovation for trustees. While the majority of schemes are looking to buyout over the long-term, we fully agree that there needs to remain a range of different options in the short to medium term as they continue to derisk. Schemes potentially taking longer to reach the point of approaching the insurance market are leading to attractive pricing levels for those that are choosing to insure.”

James Brundrett, senior investment consultant at Mercer: “It is unlikely the growing number of endgame options is going to slow down risk transfer activity next year. Those with plans to undertake risk transfer in the short term are unlikely to be put off by the government’s surplus plans, which aren’t due to take effect until 2027.

“However, a number of schemes that are on a longer journey to risk transfer over the medium term may be more likely to pause and reassess, not only in response to new, innovative end game options, but also to work out their strategy for managing DB pension fund surplus, given the government’s intentions to make surplus extraction more straightforward. This could be to the benefit of both members and sponsors.”