The Pension Risk Transfer Revolution
Why 2025 is Reshaping the Retirement Landscape for UK and US Businesses
The pension risk transfer market is undergoing a major transformation. Defined benefit pension plan sponsors, especially in the US and UK, are increasingly looking to divest their pension liabilities. This trend represents a shift in how long-term financial obligations are managed by corporations. As interest in these transactions continues to grow, it is essential for accountants, trustees, and finance professionals to closely understand how the market is evolving. Having a firm grasp on the current environment, the reasons driving this momentum, and what lies ahead will be crucial in helping clients make well-informed decisions.
What Is Pension Risk Transfer?
Pension risk transfer involves transferring the responsibility for pension liabilities—typically from an employer’s defined benefit scheme—to an insurance company. This means the insurer takes on the obligations to pay members their retirement benefits in return for a premium. The transaction may cover all members or just certain groups, and it can take several forms, including buy-ins, buy-outs, and longevity swaps.
This change marks a strategic shift in how businesses approach pension responsibilities. For decades, employers managed pension schemes themselves, dealing with investment performance, inflation, and the risk that members might live longer than expected. Today, firms are growing more inclined to remove these obligations from their balance sheets so they can focus on core business operations.
Momentum in the Market
Recent years have highlighted strong interest and activity in pension risk transfer. In the US, nearly all plan sponsors with de-risking goals now intend to fully divest their liabilities within five years. In the UK, the volume of transactions continues to grow, with expectations of over £40 billion in deals annually.
This momentum is fuelled by several trends. Higher interest rates have made pension transfers more affordable, as the cost of securing future benefits has decreased. Additionally, strong equity market performance has helped increase pension funding levels. This makes it clearer when a scheme is in good enough health to afford transferring its risks to an insurer. There is also heightened awareness of the strategic flexibility that comes from removing legacy pension obligations.
Wider Market Participation
Where pension risk transfer was once only considered by the largest UK and US firms, it is now being pursued by mid-sized and even smaller schemes. Insurers have increased their capacity, and more providers are entering the market. In the UK, even pension schemes under £100 million are actively securing deals.
Acquisition activity is also reshaping the competitive landscape. In 2025, Brookfield Wealth Solutions announced plans to acquire Just Group, while Athora launched a significant deal to acquire Pension Insurance Corporation Group. These moves underscore the sustained interest from major financial institutions in expanding their presence in this market.
Understanding the Options
Pension risk transfer can take several different forms, each designed for different circumstances.
Buy-ins involve purchasing an annuity policy held within the scheme’s assets, which matches the benefits owed to certain members—usually pensioners. Buy-outs go a step further and remove all liabilities from the scheme, transferring full responsibility to the insurer.
Lump sum offers are another de-risking strategy. Here, members are given a one-time option to take a cash amount instead of a future retirement income. This can lower the number of members within a scheme and reduce long-term obligations, but it also comes with its own administrative and communication challenges.
Longevity swaps are more targeted in nature. These contracts cover the risk that members live longer than expected. The scheme keeps financial control of its investments, but the insurer will compensate the scheme if longevity experience exceeds expectations.
Pricing Matters
Accurate pricing is critical for pension risk transfer success. Insurers calculate the cost of taking on pension liabilities based on various factors—interest rates, life expectancy assumptions, and scheme data. The more accurate and complete a scheme’s data is, the more likely it is to receive competitive pricing.
Competitive bidding among insurers can further help plan sponsors achieve lower costs. Recent data shows that the cost of annuitising pension benefits is only marginally higher than their accounting value, indicating a stable and cost-effective market. However, pricing does shift. Factors such as credit spreads, inflation risk, and regulatory capital requirements can all influence how much insurers charge to take on liabilities.
Regulatory Considerations
Pension risk transfer does not take place in a vacuum. Both the UK and US have detailed regulatory frameworks to ensure members’ interests are protected.
In the US, fiduciaries must select the safest available annuity provider, based on clear criteria including an insurer’s financial strength and investment practices. Increasingly, litigation has challenged whether proper processes are followed in selecting insurers. Questions around whether fiduciaries considered all reasonable options have made headlines and heightened awareness of the need for careful due diligence.
In the UK, insurers are closely supervised by the Prudential Regulation Authority. Recent changes to how insurers report the value of their illiquid assets and structure their reinsurance arrangements reflect a growing concern around systemic risk.
Participant Impact
Members will ultimately feel the real-world effects of these transactions. When pension liabilities are transferred, members’ benefits are usually guaranteed by the insurer, rather than the pension scheme or the employer. In the US, this means PBGC guarantees no longer apply, and protection depends on state guaranty association rules, which often have lower limits.
Members who are offered lump sum options need clear explanations to help them make informed choices. Taking a lump sum might mean more flexibility, but also more responsibility. Many may not have the skills or access to professional advice needed to make that money provide lasting retirement income.
Looking Ahead
Pension risk transfer activity is expected to grow. More than 90% of US plan sponsors with de-risking goals now intend to fully exit their defined benefit responsibilities. In the UK, market forecasts suggest continued strong volumes and increasing insurer capacity.
Innovation in risk transfer products, improved data infrastructure, and payment platforms will likely make these transactions easier to execute. New structures—like superfunds or capital-backed journey plans—may provide additional options to schemes that are not immediately ready for full buy-out.
Conclusion
The landscape of pension risk transfer is fast evolving. It is becoming a mainstream part of corporate financial planning, and with it comes an increased need for accurate data, thoughtful fiduciary oversight, and clear communication with members.
For accountants, trustees, and professional advisors, understanding this market is no longer optional. It is becoming a core element of pension scheme strategy. As transactions become more common, competitive, and complex, those equipped with the right knowledge will be in the best position to help clients achieve positive outcomes.
The pension risk transfer revolution is underway—and understanding its mechanisms, motivations, and market dynamics is essential for guiding businesses and pension schemes through this transformative time.
