DB Scheme Endgame: Buy-In, Buyout, Superfunds, and What Happens to Members

The UK DB pension scheme landscape is in the middle of a profound structural transformation. Driven by improved funding levels (boosted by the 2022 rise in gilt yields), a wave of sponsors seeking to remove pension risk from their balance sheets, and a buoyant bulk annuity insurance market, thousands of DB schemes are pursuing some form of endgame strategy — a transaction designed to transfer the scheme's liabilities to an insurer or alternative risk vehicle.

For the millions of active and deferred members in those schemes, understanding what these transactions mean — and what protections they carry — is increasingly important. This guide explains the main structures in plain terms.

This article is for general information only and reflects the market as at June 2026. Endgame transactions are governed by complex law and regulation. Members affected by a transaction should obtain independent advice.

---

The DB Funding Landscape in 2026

Following the sharp rise in gilt yields in 2022, the aggregate funding position of UK private sector DB schemes improved dramatically. Many schemes that had been in structural deficit for decades moved to funding surpluses — and with improved funding came the ability to transact.

The Pensions Regulator (TPR) and the Department for Work and Pensions (DWP) have encouraged schemes to think proactively about their long-term destination: not just "what do we do today" but "where does this scheme end up, and for whom?"

The primary options for a DB scheme's endgame are:

1. Run-on (continuing independently, potentially sharing surplus with members or employer)
2. Buy-in (insuring liabilities as a scheme asset)
3. Buyout (discharging all obligations to members through individual policies)
4. Superfund transfer (consolidating into a commercial superfund)

Each has distinct characteristics for members.

---

What Is a Buy-In?

A buy-in is a transaction in which the DB scheme trustees purchase a bulk annuity policy from an insurance company. Critically, in a buy-in:

• The policy is an asset of the scheme, not a policy in the name of individual members.
• The insurer agrees to pay the scheme the cash flows it needs to meet members' benefits, but the scheme (and its trustees) remains directly responsible to members.
• Members see no change to their benefits, their pension statements, or their relationship with the scheme.

A buy-in is primarily a de-risking tool for the scheme and sponsor. It transfers longevity risk (the risk of members living longer than expected) and investment risk to the insurer. The scheme no longer needs to hold assets matching its long-dated pension liabilities — the insurer holds them instead.

Buy-ins are often a stepping stone to full buyout. Once the scheme has bought in all of its liabilities (pensioners first, then deferreds), converting to a full buyout becomes simpler.

---

What Is a Buyout?

A buyout is the full discharge of the scheme's obligations to members. In a buyout:

• Individual annuity policies are issued in each member's name by the insurer.
• The scheme is formally wound up.
• Trustees are released from their obligations.
• The sponsoring employer has no further pension obligations.
• Members receive their benefits from the insurer directly, under the terms of their individual policy.

From a member's perspective, a buyout changes who pays your pension (from the scheme to the insurer) but should not change what you receive — the insurer is required to match the scheme's benefit structure exactly.

However, members should note:

• The insurer is regulated by the Prudential Regulation Authority (PRA) and is subject to Solvency II/UK Solvency capital requirements. The financial strength of major insurers is considered very robust, but it is not the same legal protection as a trustee-administered scheme backed by a statutory employer covenant.
• In the event of insurer insolvency, the Financial Services Compensation Scheme (FSCS) provides protection for policyholders — up to 100% of the guaranteed amount for annuities, with no cap — which is broadly equivalent to, or in some cases stronger than, the PPF protection available from a scheme.
• Discretionary increases (above statutory minimums) that were paid by the scheme may or may not be continued by the insurer. Members should check whether any discretionary escalation they received was incorporated into the buyout policy terms.

---

The Longevity Swap Alternative

For very large schemes (typically £1 billion or more in liabilities), a longevity swap is sometimes used as an intermediate step. A longevity swap:

• Transfers only longevity risk to a bank or reinsurer, while the scheme retains investment risk and management.
• Does not involve transferring assets or issuing policies.
• Is an over-the-counter derivative contract, typically for a term of 10–20 years.

Longevity swaps are complex instruments, primarily used by large corporate schemes as a risk management tool rather than a direct route to endgame. They are not directly visible to members and do not change benefit entitlements.

---

The Major Bulk Annuity Insurers

The UK bulk annuity market is dominated by a small number of large life insurers. As at 2026, the principal providers include:

Legal & General (L&G) — the market leader by volume historically, with an extremely large book of buy-ins and buyouts spanning several decades.

Aviva — a major player with significant market share in mid-market and large scheme transactions.

Pension Insurance Corporation (PIC) — specialist pension insurer focused exclusively on the bulk annuity market, managing over £55 billion in assets as at 2025.

Just Group (Just Retirement) — a significant player in the smaller end of the bulk annuity market and enhanced lifetime annuities.

Canada Life / Rothesay Life — also active in the bulk annuity space.

The market has been operating at near-capacity in recent years due to the surge in transactions following the 2022 gilt market movements. Insurer capacity is not unlimited, and pricing can be competitive. Schemes with clean data, well-documented liabilities, and good member records achieve more favourable pricing.

---

What Is a Pension Superfund?

A pension superfund is a consolidation vehicle — a large DB scheme that accepts transfers from multiple employer-sponsored DB schemes, pooling their liabilities and assets under a single set of trustees and a capital buffer.

The theory: smaller schemes have higher per-member costs, less investment expertise, and weaker governance. Consolidating into a superfund achieves economies of scale, professional management, and a capital buffer funded by the commercial operator that provides additional security for members.

Two superfunds have been operating under TPR's interim regulatory regime:

Clara — The Pensions Superfund: The first superfund to receive TPR approval (2021) and to complete transactions. Clara targets schemes that are insufficiently funded for an immediate insurance buyout but are too well-funded to use the PPF. Clara operates as a bridge to eventual full buyout.

The Pensions Superfund (TPF): Another authorised entity in the market.

How a Superfund Transfer Affects Members

Members who move to a superfund:

• Transfer from their scheme's trustee board to the superfund's trustee board.
• Are backed by the superfund's capital buffer rather than the original employer covenant.
• Are no longer connected to the original employer — once the transfer completes, the employer's obligations cease.
• Do not receive individual insurance policies (unlike a buyout). The superfund is a regulated occupational pension scheme, not an insurance company.

The long-term target is for the superfund to accumulate sufficient funding to itself execute a bulk annuity buyout with an insurance company. Until that point, members are dependent on the superfund's assets, governance, and capital buffer.

TPR's assessment criteria for superfund transactions include: member outcomes must be at least as good as the PPF outcome; the employer covenant must be insufficient to support running on or achieving a near-term buyout; and the superfund must hold adequate capital.

Member Protections

Members in superfund transactions benefit from:

• TPR oversight and the superfund's regulatory capital requirements.
• PPF eligibility — if the superfund itself fails, members can access the PPF in the same way as conventional scheme members (PPF compensation is subject to the statutory framework, though the long-standing PPF compensation cap ceased to apply following the Hughes v PPF litigation).
• TPR's assessment process, which includes an actuarial and member-outcome test before approving any transfer.

---

What Should Members Do If Their Scheme Announces a Transaction?

1. Read the member communication carefully — trustees are required to notify members and provide adequate explanation of what is happening and why.

2. Understand whether it is a buy-in or buyout — a buy-in changes nothing for you immediately; a buyout changes who pays your pension.

3. Check the benefit terms — in a buyout, confirm that any discretionary increases, augmented benefits, or early retirement factors have been preserved in the insurance policy.

4. Check enhanced ill-health provisions — if you have an outstanding ill-health application, confirm the position before the scheme winds up.

5. Update your nomination form — in a buyout, your pension passes to an insurance company that may have different death benefit processes.

6. Seek independent advice — particularly if you are considering a transfer out before a buyout completes, or if you have significant benefits at stake.

---

How Global Investments Can Help

Global Investments advises DB scheme members, trustees, and sponsors navigating pension endgame transactions. For individual members, we provide independent analysis of whether to transfer out before a buyout or superfund transaction, what the member-level implications of different endgame structures are, and how to protect discretionary benefits during the transition.

We have experience working alongside trustees and employers on bulk annuity transactions and can advise members independently of the scheme's advisers — ensuring that member interests are independently represented in a process that can otherwise be dominated by trustee and sponsor priorities.

This article is for general information only and does not constitute regulated financial advice. The bulk annuity market, regulatory regime for superfunds, and specific transaction terms vary. Members affected by scheme endgame transactions should seek independent regulated advice.