TPR guidance provides balanced support for a range of endgame options
TPR guidance provides balanced support for a range of endgame options
10 Jun 2025
On 3 June 2025, The Pensions Regulator (“TPR”) published guidance titled “New models and options in defined benefit pensions schemes” which is aimed at trustees and employers of defined benefit and hybrid schemes. This covers a range of endgame strategies, including: running on at low dependency; running on to build and use surplus; transferring to a consolidator, such as a superfund; and insuring benefits with an insurance company via buy-ins and buyouts.
What is clear from the guidance is that TPR is keen to recognise the sheer breadth of choices now available to schemes in terms of getting to their end goals and getting the best for their members. Buyout is no longer the only option. Each aspect, in particular running on for surplus, is examined in detail and schemes can use this guidance to help each individual scheme circumstances.
Download our XPS Insights here:
What you need to know
- On 3 June 2025, The Pensions Regulator (“TPR”) published guidance titled “New models and options in defined benefit pensions schemes” which is aimed at trustees and employers of defined benefit and hybrid schemes.
- The guidance covers a range of endgame strategies, including: running on at low dependency; running on to build and use surplus; transferring to a consolidator, such as a superfund; and insuring benefits with an insurance company via buy-ins and buyouts.
- TPR makes it clear that buyout is no longer the only (or necessarily the best) option, although it does highlight the benefits of both buy-ins and buyouts and notes that many trustees are expected to choose this option eventually.
- The guidance is very balanced, providing comfort to trustees and employers that they have the freedom to assess each option and work out what is best for their scheme. It emphasises the need to consider scheme-specific circumstances in choosing the right strategy, and includes specific factors that trustees should consider.
- The guidance sets out TPR’s support for surplus release in the right circumstances, noting that, subject to legislation permitting this, “…in situations in which the scheme is likely to remain fully funded on a low dependency basis and there is no realistic risk of employer insolvency, it is unlikely that TPR would have reservations about the [surplus] release…”
- TPR will publish further guidance on surplus release once the expected changes in surplus legislation (as signalled in the Government’s 29 May announcement on surplus flexibilities) are in force.
Actions you can take
- Review the guidance to ensure you understand TPR’s expectations for trustees and employers when weighing up all endgame options. In particular, note the balanced approach in TPR’s guidance and the need to consider all options and make the right decision for your scheme’s own individual circumstances.
- Reflect on your scheme’s agreed long-term strategy. If you do not have one, start discussing this now, between the trustees and the employer.
TPR’s factors to consider when assessing endgame options
The finer detail: TPR guidance in more detail
| Running on at low dependency |
The guidance defines the concept of “running a scheme on” as continuing to pay benefits as they fall due until remaining liabilities are discharged or transferred, and TPR notes this could be a preferred or interim strategy. Potential benefits to this are outlined: higher pensions or discretionary benefits for members (especially where there is no inflation indexation); retaining control over member option terms; allowing illiquid assets to run off without taking a “haircut” on value; and being able to transfer risk on a more competitive basis in the future. |
| Surplus generation and release |
TPR notes schemes may continue running on after being fully funded on a buyout basis. TPR confirms this should be a conscious decision and trustees should be comfortable that members will likely benefit. TPR expects trustees to consider whether the scheme is sufficiently well-funded and the employer covenant sufficiently strong to face potential risks that may materialise. Amongst other factors, trustees should examine whether the scheme has sufficient scale over the period of run-on to operate efficiently. Where a scheme is well-governed and well-funded, TPR has noted “it is unlikely that TPR would have reservations about the [surplus] release”. |
| Insurance solutions | TPR notes that buy-ins and buyouts are a well-established solution for transferring risk to an insurance company. TPR highlights the benefits of this to trustees and employers, for example the key benefit of securing benefits in full for the trustees and discharging risk for the employer; however, TPR also provides balance in commenting that there are a wide range of factors to consider before entering into such an arrangement, such as the loss of discretions and the funding costs of bridging to an insurance solution. |
| Alternative arrangements |
TPR outlines a number of other arrangements that may be used, either to help a scheme achieve one of the strategies described above, or as the strategy itself. The guidance covers a range of financial and governance solutions, intended to improve governance and management of a scheme or drive the scheme towards a specific goal. The arrangements discussed include the delegation of investment decision making (either to a Chief Investment Officer or Fiduciary Manager), the use of accredited professional trustees, a transfer to a defined benefit master trust or multi trust for non-associated employers, the use of capital-backed arrangements to support a scheme to a specified goal, and consolidation into a superfund. All the above arrangements have numerous factors that trustees are directed to consider before entering into them. |
| Other comments and case studies |
The guidance also includes some detailed case studies which provide further insight into the circumstances in which TPR might consider a particular strategy to be more or less appropriate, and the key considerations for trustees when evaluating different options. Overall, the tone and content of TPR’s guidance is very balanced, providing comfort to trustees and employers that they have the freedom to assess each option and work out what is best for the particular circumstances of their scheme. |
Find out more
For further information, please get in touch with Charles Smith, Sarah Vanhouse or speak to your usual XPS Group contact.
Related links
- Register for events
- Join our mailing list
Register for events
We enjoy hosting a wide range of events for pension scheme trustees, corporate sponsors, independent trustees, and pensions professionals.
Join our mailing list
Keep up to date with our latest news and views including pension briefings, XPS insights, reports and event invitations.