If you have a defined benefit pension, 2024 and 2025 may be the most important years you've ever heard of, and most people have absolutely no idea why.
A record-breaking wave of DB pension buy-ins and buyouts is sweeping the UK. In 2024 alone, close to 300 buy-in transactions were completed, with a combined value of approximately £48 billion. And the figures for 2025 are expected to be even higher.
So what does this mean for your retirement income? Should you be worried? And is there anything you need to do?
In this post we break down exactly what a buy-in and a buyout are, why this is all happening right now, and what defined benefit scheme members should genuinely be thinking about.
What Is a DB Pension Buy-In?
A buy-in is the first step in what is often called an ‘endgame' transaction for a defined benefit pension scheme. Here is how it works:
- An insurance company strikes a deal with the DB scheme's trustees
- The insurer takes on the financial liability of paying members' retirement income
- Nothing changes immediately for you as a member — your pension payments continue as normal
- But behind the scenes, the risk has shifted from your employer onto a large insurance company
Think of it like this: your employer has outsourced the promise to pay your pension to an insurer. You might not even notice for some time, but the ownership of your pension liability has quietly changed hands.
What Is a DB Pension Buyout?
The buyout is the endgame, the full and final conclusion of the process. When a buyout happens:
- The insurance company takes complete and permanent responsibility for your pension
- The original DB scheme is wound up entirely
- Even the branding or scheme name can change
- Members receive their income directly from the insurer going forward
Buy-in first, buyout eventually. The buy-in is when the insurer commits capital and takes on the liability. The buyout is when the deal is complete and your former employer steps away from your pension altogether.
Why Is This Happening Right Now? The 2024-2025 Gold Rush
According to the Mercer Global Pension Buy-In Index, 2024 saw close to 300 DB pension buy-in transactions in the UK, at a total value of around £48 billion, a new record. And the number of participating insurers is at an all-time high.
So why now? The answer comes down to interest rates.
During the pandemic, the UK base rate sat at historic lows. When rates rose sharply, pushing the 30-year gilt rate significantly higher, something dramatic happened to DB pension funding levels. Schemes that had spent years running large deficits suddenly found themselves in surplus, sometimes almost overnight.
That created a window for employers. Those who had long dreaded the cost of their pension liabilities could finally look to offload them to insurers at an attractive price. And insurers, who price annuity-style products based on those same long-term gilt rates, were more than willing to take the business.
Is This Good or Bad for DB Members?
On paper, there is an argument that moving your pension to a large, well-regulated insurance company provides more security than relying on your former employer. Large insurers are tightly regulated by the Prudential Regulation Authority.
But here is the uncomfortable reality: these are enormously complex transactions involving vast sums of money. Employers want to offload liabilities. Insurers want to make a profit. And in the middle of all of that, the normal member, someone sitting at home expecting a reliable retirement income for the rest of their life, can easily become an afterthought.
The PRA has already issued warnings to life insurers about specific contract clauses called solvency-triggered termination rights (STRs), which could create operational and financial risks under stress scenarios. The Pensions Regulator has also issued guidance in 2025 encouraging trustees and scheme sponsors to explore a broader range of endgame strategies, essentially a warning not to all rush through the same door at once.
The Conflict of Interest Nobody Is Talking About
Financial services make up roughly 22 to 23 percent of the FTSE 100. The UK economy is, to a significant degree, built on financial services. That creates a structural conflict between government interest, regulatory policy, and the interests of individual pension members.
The people working on these transactions are not junior employees. They are highly paid directors, analysts, and dealmakers at some of the largest institutions in the country. And the incentive at every level is to complete the deal, not necessarily to optimise outcomes for individual members.
That is not to say these transactions are inherently harmful. But it is absolutely a reason to pay close attention to what is happening inside your own scheme and to stop assuming someone else is looking out for you.
What Should DB Pension Members Do Right Now?
Whether your defined benefit pension is worth £50,000 or £1,000,000, this is one of your most significant financial assets. Here is what you should be thinking about:
1. Find out what is happening inside your scheme
Contact your scheme trustees or administrator and ask directly:
- Has a buy-in already taken place?
- Is a buy-in currently being planned or negotiated?
- Is a full buyout (wind-up) on the horizon?
This information is not always proactively communicated to members. You may need to ask, and you are entitled to know.
2. Understand your cash transfer value
If you have ever considered transferring out of your DB scheme, a buy-in or buyout should prompt you to properly review your position. Your cash transfer value (CTV) is the lump-sum equivalent of your DB pension rights, and its value can shift depending on market conditions and where your scheme sits in its lifecycle.
3. Start a conversation with a specialist financial adviser — early
DB pension transfers are irreversible decisions. Most people who go through this process take anywhere from 6 to 36 months of research and conversation before making any decision. The earlier you start talking to a specialist, the better positioned you will be, whether you ultimately stay in your scheme or transfer out.
A good adviser should be transparent about costs, clear about the process, and willing to build a relationship with you before any commitment is made.
What About the Surplus Extraction Reform?
The government is also considering changes to the rules around how DB pension surpluses can be accessed, potentially allowing schemes to unlock their surplus before being fully wound up. If this reform goes ahead, it could affect the economics and timing of buy-ins and buyouts for some schemes. Longer term, overall demand for bulk annuity transactions is unlikely to be materially reduced.
Key Takeaways
- A buy-in is when an insurer takes on pension liabilities — members notice no immediate change
- A buyout is the full wind-up of the DB scheme, with the insurer permanently taking over
- 2024 saw a record ~300 buy-ins worth £48bn, driven by higher interest rates creating DB surpluses
- 2025 is expected to see even more transactions
- This is not automatically bad news, but members need to be informed and engaged
- Find out what is happening inside your specific scheme now
- If you are considering a transfer, start your research and adviser relationship early
Not sure what a buy-in means for your pension?
Whether a buy-in or buyout is on the horizon for your scheme, or you simply want to understand your options — the Cameron James team are here to help. We don't charge for initial conversations, and we won't push you into a decision. Just an honest conversation about your defined benefit pension and what your options look like.
Get in touch with Cameron James today — call us, email us, or use the contact link below. The earlier you start the conversation, the more options you will have.
→ Book a complimentary consultation with our team today
DISCLAIMER
This article is for informational and educational purposes only and does not constitute financial advice. Defined benefit pension transfers are complex, and transferring out of a DB scheme is an irreversible decision. You should always seek independent regulated financial advice before making any decision about your pension. Cameron James is authorised and regulated by the Financial Conduct Authority.
Frequently Asked Questions:
- What is the difference between a DB pension buy-in and a buyout?
A DB pension buy-in is when an insurance company takes on the financial liability for paying members’ retirement income, while the scheme trustees remain in place. A buyout is the full conclusion of this process: the scheme is wound up, and the insurer takes complete and permanent responsibility for members’ pensions. - Why are so many DB pension buy-ins happening in 2024 and 2025?
Rising interest rates have significantly improved the funding positions of UK defined benefit pension schemes, moving many from deficit into surplus. This has created a rare window for employers to offload pension liabilities to insurers at attractive prices, leading to a record number of buy-in transactions in recent years. - Is my DB pension safe if there is a buy-in or buyout?
In most cases, your pension income continues unchanged. Large insurers involved in buyouts are tightly regulated by the Prudential Regulation Authority. However, members should stay informed about what is happening inside their scheme, as these are complex transactions with significant financial implications. - Should I transfer out of my DB pension before a buyout?
This is a complex and irreversible decision that depends entirely on your personal circumstances. You should always seek independent, regulated financial advice before considering a DB pension transfer. Speaking to a specialist well in advance is essential, as many people take months or even years to fully assess their options. - What is a cash transfer value (CTV) and how does it relate to a buyout?
A cash transfer value (CTV) is the lump-sum equivalent of your defined benefit pension rights if you were to transfer out of the scheme. Buy-ins and buyouts can affect both the availability and attractiveness of a CTV, which is why understanding your scheme’s long-term strategy is important for members considering a transfer.