2026 DB outlook: Opportunity and innovation

The 2020s have been a transformational period for UK DB pension schemes, with a shift driven by evolving regulations, new requirements and the ongoing buyout or run-on debate. Rather than viewing these changes as obstacles, we see them as catalysts for opportunity and innovation.

In ‘A time for opportunity’ we discuss the recently published Pension Schemes Bill and how it opens the door for meaningful discussion and engagement. The part of the Bill focussed on surplus release provides a blueprint for the ‘rules of the road’ ahead of final regulation expected in 2027. We assess what we do know, and look forward to the opportunity the industry has to pause, discuss and consider the right way forward.

Interest in run-on has continued to build in 2025, with the proportion[1] of schemes adopting run-on as a long-term strategy up by around 10% compared to 2024. In ‘Investing for run-on’ we assess whether this is really a new concept, before delving into some of the practical investment considerations. Drawing lessons from life insurers, we also highlight the unique flexibility available to pension funds and the ability to access the ‘best of both worlds’. In a low-credit spread environment, there are still a number of other levers that pension investors can pull to target returns within a cashflow-aware framework.

For those pension funds with a long-term time horizon, what innovations in the responsible investment space should trustees have in mind in 2026? In ‘Responsible innovation’ we revisit climate and nature, where engagement remains crucial, in our view, for driving meaningful, real-world change.

Buyout will continue to be the near-term direction of travel for many schemes. After all, 54% of UK DB schemes were in surplus on a buyout basis at the end of 2024, equivalent to c.600bn of buyout liabilities[2]. However, with ‘only’ around £40bn[3] of transactions in 2025 as a whole, it will take many years for schemes to collectively achieve their buyout goals.

In ‘Seeking value in bulk annuity transactions’ we look at the importance of preserving buyout affordability, improving pricing and managing residual asset surplus. In 2026 we expect continued innovation in ‘route to buyout’ approaches that allow well-funded schemes to seek value in bulk annuities.

Going full circle, it is clear that ‘a time of opportunity’ comes with increased choice and challenge. In 2025 we saw the new DB funding code come into force and the requirement for trustees to document their long-term plan for either buyout or run-on. In ‘Evolving your investment strategy’ we set out our hot topics for 2026 in light of recent regulatory change. For those considering long-term run-on, we believe that good governance, clear policies, effective delegation and ongoing collaboration will be essential to achieving the best outcomes for both members and sponsors.

Thank you for reading our latest DB outlook. At L&G we will seek to continue to innovate across the full breadth of solutions to help you achieve your objectives in 2026 and beyond.

Discover more in our 2026 DB outlook.

[1] Aon 2025 Endgames Survey indicated 28% (up from 17% in 2024) looking to run on beyond point needed for settlement readiness of those who had made a decision Aon-2025-DB-Endgames-Survey.pdf
[2] The Pension Regulator’s Annual Funding Statement 2025
[3] LCP November 2025