Susannah Calder, Partner, Aon
Finalising the wind-up of a pension scheme is like crossing the finish line in a marathon—it's a major achievement. However, as trustees, some challenges can still appear after the race is over. After the scheme has been fully transferred to an insurer, trustees can still face claims related to decisions or actions taken while the scheme was under their care. To safeguard against these risks, trustees need to consider run-off insurance as part of an overall trustee protections package.
What are the risks?
Even the most diligent trustee can be exposed to risks, making post-wind-up protection essential. Common examples of the types of claims trustees remain exposed to long after a pension scheme has wound up include:
- Regulatory investigations into the management of the scheme
- Allegations of maladministration
- Issues arising from miscommunications to members
- Claims from beneficiaries who were inadvertently overlooked
Run-off insurance provides protection by covering trustees against personal liability for claims related to their actions while managing the scheme. Typically, this insurance is arranged through a one-off premium payment, offering peace of mind well into the future.
What Does Run-Off Insurance Cover?
A standard run-off policy insures trustees and other covered parties against legal liabilities arising from wrongful acts committed during their tenure. Importantly, these policies often include cover for claims from overlooked beneficiaries.
However, like any insurance, there are exclusions—most notably, acts of deliberate dishonesty or fraud are not covered. Policies can also be tailored with exclusions specific to the scheme in question.
What are the policy period options?
The length of time a run-off policy remains active—known as the policy period—varies between insurers. Options currently available in the market range from 6 years to 15 years, with one insurer offering lifetime policies after a period of absence. This return of lifetime coverage is a notable development for trustees seeking long-term security.
What is the maximum protection available?
Insurers typically limit the maximum coverage they are willing to provide on a single policy, often capping at £10 million. For schemes requiring greater protection, additional policies can be layered on top of the primary policy—a strategy known as 'building a tower of insurance'. Each layer provides extra coverage that is triggered only after the underlying policy is exhausted. This approach allows for substantial total coverage, tailored to the needs and scale of the pension scheme. Aon have built structures with protection in excess of £100 million for clients seeking greater protection.
How long does it take to arrange run-off cover?
Arranging run-off insurance is not an overnight process. For standard coverage, it is advisable to begin preparations at least six months before the expected wind-up completion. This timeframe allows for gathering underwriting information, reviewing policy wordings, and negotiating terms with insurers.
If a tower of insurance is needed, the process can be more complex, involving multiple insurers and additional negotiations. In these cases, starting at least twelve months in advance is recommended.
What cover is appropriate?
Determining the right level of run-off insurance is a subjective decision, as the potential maximum claim is often unknown and difficult to forecast. Trustees should consider the size of the scheme, the strength of any existing company indemnities, and their available budget. Ultimately, the coverage should be sufficient to address all potential defence costs and liabilities that could arise over the policy period.
Is it possible to ‘lock in' pricing?
While insurers can provide premium indications to help with planning, these quotes are typically valid for a limited period—often just 60 days. Because run-off insurance may be arranged years in advance of a scheme's actual wind-up, trustees must ensure their plans remain flexible to accommodate any changes in pricing or market conditions.
Key Considerations
Run-off insurance is a vital tool for protecting trustees after a pension scheme winds-up. However, the insurance market is dynamic, with changes in insurer appetite, capacity, and pricing occurring regularly. For example, increased market capacity and the re-emergence of lifetime policies have occurred in 2025. Trustees should keep a close eye on the market throughout the wind-up process and be prepared to adjust their approach as needed.
Standard policies may not always offer sufficient protection. Trustees should consider building insurance towers and negotiating bespoke terms for greater security. However, these approaches require additional preparation and expert guidance.
Working with a knowledgeable run-off broker is essential. The right broker can help trustees navigate the complexities of the market, access the necessary capacity, and secure terms that best meet the needs of the scheme and its beneficiaries. At Aon, we have supported over 500 schemes through buyout and wind-up, and developed a deep understanding of the requirements of trustees, sponsors and insurers. Our experience in securing run-off cover ranges from the smallest to the largest schemes. We build a comprehensive solution for any scheme to reach the optimal outcome and provide the comfort trustees and members need. For further information on building run-off insurance for your scheme, click here.
