Chris Hodgson, Associate Partner, Aon
A Year of Purposeful Journeys
Looking back on 2025, one theme has persisted through every successful bulk annuity transaction: well-prepared asset strategies not only reduce risk and cost, but are also critical for making a scheme attractive to insurers when it matters most.
Every scheme takes its own journey to buy-in readiness and there's no one-size-fits-all approach. Some, facing tight affordability, held growth assets until insurer quotes landed, shifting only once price certainty was achieved. Others spent over a year in steady derisking mode, gradually moving into gilts and credit, while schemes with significant illiquid holdings extended their transaction timeframes to allow for a measured approach to exiting those assets.
Our 2025 Global Pension Risk Survey showed that schemes are accelerating their shift out of illiquid assets, with 42 percent planning a reduction in illiquid growth assets as they ready themselves for buy-in, compared to just 35 percent last year.
No matter the route, trustees have balanced generating returns to support technical provisions funding, with liquidity needs and the holding of suitable assets for premium payment.
Preparing for Insurer Engagement
Asset preparation is central for making schemes more attractive and reducing execution risk. Insurers typically favour portfolios consisting of gilts, investment-grade credit, and cash - assets that can be matched neatly to their own pricing mechanisms. Passing across a well-prepared portfolio not only simplifies the mechanics of payment but also minimses transaction costs and avoids last-minute complications.
It's important to recognise there is no single best solution—insurer preferences shift with market conditions and asset flow within their portfolios. Schemes need to navigate a range of asks: some insurers have appetite for certain credit assets, others may want only gilts, and some are willing to structure deferred premiums to allow schemes to run off illiquids.
Our experience this year has shown us insurers are less likely to accept credit in the premium, pushing schemes to divest. Indeed, in our 2025 insurer survey conducted earlier this year, insurers named asset availability and credit market dynamics as one of the key headwinds anticipated for the market over the next 5 years.
When advising on the £4.6 billion pensioner buy-in for Ford this year, a significant amount of time was spent liaising with insurers on price lock preferences, and in particular whether credit should be included in the price lock portfolio. By engaging on this topic early, we were able to work collaboratively with insurers on the optimal approach for the Funds.
Investment negotiation is as important as price for schemes of all sizes, especially in final execution. For a £20 million buy-in we advised on earlier this year, proactive engagement with the insurer and bespoke price-lock structuring provided stability right through to transaction.
Adapting to Evolving Preferences on Credit
Credit asset management remains nuanced but given there remains a link between credit spreads and buy-in pricing, we continue to recommend modest allocations to credit on the journey to buy-in for some schemes, with governance structured to adjust exposures quickly if insurer appetite or market pricing shifts.
Credit exposure can be achieved in a variety of ways and insurers gave their views on alternative asset classes to achieve credit exposure in our recent survey. This can involve assets such as credit default swaps or asset backed securities. That said, insurers were keen to stress that due to restrictions placed on them by the insurance regime to ensure the assets provide a close match to the profile of the underlying liabilities, not all alternative assets would be suitable for a price lock portfolio.
Instead, insurers suggested that schemes should first and foremost hedge their interest rate and inflation risk (with gilts or swaps), since those are crucial; once that is in place, adding some credit spread exposure in a liquid form can be beneficial to track pricing, but there is no one-size-fits-all asset that neatly hedges insurer pricing beyond a broad investment grade credit portfolio.
Building a Roadmap for Asset Readiness
Key stages in investment preparation include:
• Early asset strategy planning, mindful of potential roadblocks and destination options.
• Ongoing monitoring of insurer preferences and adjusting the portfolio en route.
• Immediate action once quotes are received and decisions are made.
At our recent annual investment conference, the overwhelming majority of participants identified putting governance structures in place as one of the top priorities when embarking on a buy-in project. Knowing who the decision-makers are and what needs to happen to enable quick, effective decisions has proved critical. Agile governance in the form of sub-committee remits or joint trustee/sponsor working groups has become a defining enabler for success.
Efficient Execution Whatever the Governance Model
Delegated models continue to offer strong operational and investment advantages, particularly for smaller schemes, and we've seen a record number of buy-in transactions completed through our fiduciary platform this year. Our team's expertise and infrastructure have allowed for nimble decisions, direct gilt holdings, and seamless inspecie transfers—even at smaller asset sizes.
Trustees have chosen a range of approaches: fiduciary or advisor led. What matters most is ensuring your governance matches your scheme's needs and objectives. A tailored structure, clear responsibilities, and the right tools for execution are what enable buy-in projects to run smoothly, no matter your starting point.
Practical Lessons from 2025
Successful buy-in journeys in 2025 have relied on starting investment planning early, keeping insurer preferences front and centre, and recognising that asset negotiation often matters just as much as headline pricing. The most effective trustee teams have built clear, flexible governance structures to ensure they can act quickly and trade as soon as quotes arrive.
In summary, those schemes that prepared their assets early, kept their options open, and worked flexibly with insurers saw smoother—and often more competitive—settlements. Asset readiness has become not just a technical requirement, but a strategic advantage.
For more information on insurer views on asset readiness, please look out for Aons insurer survey report being issued in December.
