Over the past few years, there have been significant developments in the market, expanding the range of arrangements and endgame options available to defined benefit (DB) pension schemes.
We have produced guidance to help trustees and employers navigate their available options by:
- providing an overview of what is available in the market
- highlighting factors to consider in respect of these arrangements
While developing the new models and options in defined benefit pensions schemes guidance, we reached out to industry participants to gather feedback on the content and style, and to ensure trustees would find the guidance helpful when considering options for their DB schemes.
Published: 3 June 2025
Questions and responses
This is an overview of the questions we asked and the feedback we received. We would like to thank all respondents for taking the time to read the draft guidance and provide a response.
Question 1: Are the offerings contained in the guidance broadly reflective of the main options available to schemes?
You said
The majority of respondents agreed that the guidance covered the main options available to DB schemes and would be a useful starting point for trustees.
There were several suggestions for additional content and options, including having a section on captive reinsurance and surplus sharing, and adding further considerations for trustees such as residual risks and indemnities.
Respondents also suggested some tweaks to the DB master trust and DB multi-trust sections to clarify the content to ensure it fully reflected how these operate in the market.
Our response
We are pleased to hear the guidance is considered useful for trustees and employers, and we welcome the suggestions for improvement. We have taken on board the feedback and have made some changes to the guidance. Some of the suggestions included detailed information on areas of investment interest rate and inflation swaps as well as security arrangements for example, group company and bank guarantees and escrow accounts and captive reinsurance. However, we did not feel it was appropriate to include this level of detail in the guidance. This is because it is intended to provide a high-level overview of the types of endgame options available to schemes. Instead, these topics should be discussed with advisers in the context of individual schemes.
We also received feedback on DB master trusts and DB multi-trusts and have improved the explanation of how a commingled and sectionalised DB master trust works. We also included additional content on how trustee boards can be set up to govern schemes within a DB multi-trust arrangement. This is further illustrated in the case study on DB master trusts and DB multi-trusts..
In light of the government announcement in the Department for Work and Pensions DB options consultation response, the guidance includes some initial considerations and best practice for trustees who are being approached by their employer to release surplus. This is an area where we will conduct further engagement with stakeholders to produce specific guidance on surplus release in future once the new legislation is in place.
Question 2: Are the factors identified those high-level factors that trustees (and/or employers) should consider when weighing up options for their schemes?
You said
Most respondents believed that the high-level factors were accounted for, but there were some suggestions for additional content, including the following.
- More detail on how each arrangement works in practice, including examples.
- A cost/benefit analysis of suitable options identified by the trustees.
- Encouraging trustees to consider:
- liquidity and approach to cashflow management
- alignment of interests between capital backers and members
- whether there is a covenant enhancement and the extent of the same
- what recourse is available in the event of failure of any of the arrangements
Our response
We have taken on board some of the suggestions for additional content, as previously detailed and have incorporated these into the guidance. We have also added some case studies to help illustrate the options available to trustees. These include examples of questions trustees should be asking their advisers and potential providers when evaluating their options.
Some respondents wanted more detail on running on to generate a surplus, and surplus sharing arrangements, so we have added further content. We have included a case study on running on to generate a surplus, which should help trustees understand the type of steps they would need to follow if surplus was to be released. The government also intends to legislate to make it easier to release surpluses in the future. Until the legislation is in place, it is important to note that the current rules on surplus release still apply.
Question 3: Are there are other offerings and key high-level factors which should be considered/included?
You said
In addition to the responses we received on question 2, most respondents said the current draft is comprehensive and acknowledged that there is a limit to the detail it can cover due to its wide scope. Some respondents felt the guidance was quite lengthy with some repetition.
However, some said the following key, high-level factors should also be considered for inclusion.
- The need for consideration of the motivations of the stakeholders and whether the arrangement would be likely to achieve its aim. This could include consideration of factors that may block or undermine the possible benefits that could be offered by the arrangements. For example, conflicted advisers or advisers that lack in-depth understanding of the arrangements.
- Some referred to:
- member service and any impacts on quality, continuity etc
- environmental, social and governance (ESG) considerations
- actual questions/items that trustees should consider
- Responsibility for data assessment and cleansing before passing responsibility to a third party.
- Scope for potential member upside within some arrangements.
Our response
The purpose of our guidance is to provide a high-level overview of the range of options available to DB pension scheme trustees. In practice, scheme specific circumstances will be key to any decision trustees make. We cannot provide a complete list of considerations that work for every scheme, in every circumstance, and as a result, we have not taken on board every single suggested additional high-level factor. We have also been clear that the case studies only provide illustrative examples of how trustees may approach a provider and the questions they might ask. We have also highlighted the need for trustees to take appropriate advice. We acknowledge that some comments were made about the length of the guidance and that some areas were repetitive. We have worked to reduce repetition and enhance usability making the published guidance easily searchable to funnel people towards options most of interest to them.
Any other feedback
You said
The general feedback was positive. Some noted that the guidance appeared consistent with our previous views and requested that if there were any changes in positioning, we should clarify these.
There was a suggestion that we amend the guidance to explicitly give trustees the questions we expect them to ask when considering alternative arrangements.
Some respondents asked that we provide further information on the differences between DB master trusts and DB multi-trusts. There was also a suggestion that we refine our description of superfunds.
One respondent stated that it would be helpful if we could give an indication of how common the various arrangements are in the market.
In respect of capital-backed arrangements, some stated that we should be more direct about their design as covenant enhancement. In addition, the need for their terms to contain an unwind provision in the event of employer insolvency was highlighted, unless alternative provisions have been approved by us or no regulatory approval is required. There was also a suggestion that we make clear that ‘superfund’ is yet to be legislatively defined and that any definition may encompass some capital backed arrangements.
Our response
We have considered the feedback and updated the guidance in line with our high-level objectives. As part of this, we have introduced case studies with a series of indicative questions that trustees should ask themselves when considering options. This is non-exhaustive.
We acknowledge the issues raised about superfunds and capital-backed arrangements, but believe our recent update to the superfunds guidance provides sufficient context. We strongly recommend that trustees read this if they are considering one of these arrangements. In addition, the forthcoming Pension Schemes Bill will contain specific legislation on the regulation of superfunds.
We have also updated the descriptions of DB master trusts and DB multi-trusts to ensure they accurately reflect how they operate in the market.
We anticipate continued innovation in the DB scheme market. Therefore, the guidance reinforces the expectation that trustees should keep up to date with market developments. We will also consider updating the guidance in response to any significant changes in the market. We are confident that trustees will find the guidance useful, and welcome innovation in the market for the benefit of savers.
Appendix: List of respondents
Aon
Barnett Waddingham
Cardano
Department for Work and Pensions
Ernst & Young LLP
Hymans Robertson LLP
IFoA Working Group
Isio
Lane Clark & Peacock LLP
M&G
Mercer
PLSA
PricewaterhouseCoopers LLP
PSG
Schroders Solutions
TPT Retirement Solutions
Van Lanschot Kempen Investment Management
Willis Towers Watson