This year’s survey highlights that the proportion of DB schemes aiming for buyout as soon as it is affordable has decreased slightly from 2023, falling from 55 percent to 52 percent. However, schemes targeting run-on has increased from 30 percent to 40 percent, with the timescale to achieving the chosen target also reducing to 6.5 years.
Rupert Kotowski, associate partner at Aon, said: “Significant improvements in funding levels since 2022 have led to an increased focus on endgame strategies in the DB pensions industry. This, in turn, has led to an increase in the range of available endgame options, from third-party solutions such as superfunds and pension captives to in-scheme options, such as active run-on. However, buying out as soon as affordable remains the most popular long-term strategy, with the insurance market remaining buoyant.”
Derisking drives DB decisions
Lucy Barron, partner at Aon, said: “Derisking continues to be the dominant theme in the asset allocation decisions of DB schemes, with the objective and timeframe for this becoming key determinants of the investment strategy. With this in mind, the survey shows that credit, liability driven investment and annuities are again the asset classes where respondents intend to increase allocations. This reflects both derisking, shortening timescales, and risk settlement journeys - but the pace of that change has slowed from two years ago. This is partly due to the extent of derisking that has already taken place but also to market conditions.
“One of the most notable exceptions to this slowing pace of derisking, is the marked increase in schemes planning to disinvest from illiquid growth assets. Currently, 42 percent of schemes expect to reduce their holdings in these assets, a notable rise from 35 percent in 2023. It is likely that this shift is driven by the growing number of schemes preparing for annuity purchases. However, despite this overall move towards derisking, there remains a minority - 5 percent of respondents - that plan to increase their allocations to illiquid growth assets. This suggests that some schemes, particularly those pursuing a run-on strategy, continue to see value in maintaining or selectively increasing their exposure to illiquids rather than targeting buy-in.”
ESG holds its ground
Rupert Kotowski said: “Despite changing priorities in the US, UK respondents still indicated a significant desire to change portfolios to both take advantage of environmental, social and governance (ESG) opportunities and to guard against ESG risks. At least 50 percent of equity and credit portfolios now either incorporate an ESG focus, or investors are planning to incorporate an ESG focus for their investments in these asset classes. In the area of credit, 24 percent of respondents plan to implement a higher ESG focus. This tallies with Aon’s recent experience that investors now prefer including ESG factors when derisking and reshaping credit portfolios.”
Delegation trend continues
Rupert Kotowski said: “The trend of schemes delegating investment decision-making continues, with 38 percent of respondents now doing so through a fiduciary or Outsourced Chief Investment Officer (OCIO) model. Among the remainder, 24 percent have chosen not to delegate, while 35 percent have not considered it recently.
“In a world of ever-increasing regulation and demands on trustees, there is a potential advantage in freeing up valuable governance time by delegating investment structure and asset management responsibilities to a third party. But it is also an area that is increasingly competitive. We have seen a number of larger pension schemes reconsidering the approach they take to delegation and the partner they use, particularly as they prepare for the next phase of their journey.”
The 2025/26 edition of Aon’s Global Pension Risk Survey – published every two years over two decades - charts the actions, intentions and concerns of UK DB pension schemes. The UK survey had a total of 230 responses, covering both DB and defined contribution schemes, from the relatively small (less than £100 million) to the very large (over £10 billion). This year, 85 percent of respondents were from the private sector and 15 percent from the public sector. Trustees, including professional trustees, accounted for 58 percent of the survey responses, with 31 percent of responses coming from pensions managers.
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