The proportion of defined benefit schemes looking to run on has increased, but derisking continues to dominate investment strategies, a new survey suggests. Of those that have considered surplus release, the majority plan to use this for scheme expenses first.

Aon’s biennial Global Pension Risk Survey 2025/26 found the proportion of DB schemes aiming for buyout as soon as it is affordable has reduced from 55% in 2023 to 52% but remains higher than in previous surveys, and 56% of respondents planned to buy longevity insurance.

However, the proportion of schemes targeting run-on has increased from 30% to 40%, with the timescale to achieving the chosen target reducing to 6.5 years.

Those focussing on run-on are split between 22% aiming for long-term run-on – with half of schemes managing £5bn or more in that category – and 18% for flexible run-on. The latter includes schemes running on beyond buyout affordability while they sell illiquid assets or get data in order, or simply running on in a way that allows a risk transfer at short notice should the objectives change or a market opportunity arise. A third (32%) of very large schemes is aiming for this, with 29% of schemes with £1bn to £5bn and over a fifth (22%) of schemes between £100m and £1bn also in this category.

Funding improvements since 2022 have led to greater focus on endgames and an increase in the range of endgame solutions, said Aon associate partner Rupert Kotowski.

“However, buying out as soon as affordable remains the most popular long-term strategy, with the insurance market remaining buoyant,” he added.

There is also the question of what to do with any surplus, either on wind-up or once it becomes possible to release surplus in ongoing schemes. A fifth have not yet thought about what to do with surplus. Of those that have, more than half (53%) plan to meet scheme expenses from surplus.
   

A quarter (24%) intend to make regular refunds to the employer on an ongoing basis, while 22% plan to subsidise employer contributions to money purchase schemes and 14% contributions to accruing DB schemes.
 
A further 22% would enhance member benefits at the point of wind-up, and 18% favour regular improvements in member benefits. Paying a lump sum to members, which is set to become possible through recently announced  tax changes and favoured by some schemes, was not an option that could be chosen in this survey.

“It will be interesting to see how answers to this question change in the 2027 survey as the regulations are finalised,” noted Aon.

The objective and timeframe for the endgame are becoming key determinants of the investment strategy, as credit, liability-driven investment and annuities are where respondents intend to increase allocations, said Lucy Barron, a partner at Aon.

“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,” she argued.

Investors are still conscious of climate, social and governance risks and keen to take this into account, Aon said.

“In the area of credit, 24% 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,” said Kotowski.

Amid overall derisking slowing down, there has been a noticeable increase in schemes planning to disinvest from illiquid growth assets – 42% plan to reduce their illiquid holdings, up from 35% in 2023.

“It is likely that this shift is driven by the growing number of schemes preparing for annuity purchases,” believes Barron.

However, a minority of 5% plan to increase their allocations to illiquid growth assets, she points out.

“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,” she thinks.

This echoes a recent survey by Russell Investments, which found that while some schemes are looking to invest in private credit, others see it as an asset they want to sell; 14% were looking to unwind positions, rising to 17% among larger schemes.
   

    

Aon’s survey had a total of 230 responses, with trustees making up 58% of the survey responses and 31% from pensions managers. The survey covers both DB and DC schemes, ranging from less than £100m to over £10bn. The majority (85%) of scheme respondents were from the private sector.