DB pension challenges for UK businesses: how pension de-risking with insurers can help

How small DB schemes can reduce costs and secure member benefits.

British SMEs and major employers, play a crucial role in the UK economy. Thousands of these firms are quietly and consistently delivering services and products while providing employment and benefits, including Defined Benefit (DB) pension schemes, to local communities – the bedrock of Britain.

However, too often, managing these pension schemes is becoming prohibitively expensive, complex and risky for the sponsors, with too much embedded risk. A recent survey by LawDeb backs this up, finding that 93% of financial decision makers believe their company’s pension scheme poses a risk to the balance sheet. And that’s before they take into account the increasing regulatory pressure and the likelihood of continued regulatory change.

A stark warning from EY-Parthenon in February is particularly timely – their research shows that nearly one in four UK listed companies operating a DB pension scheme have issued profit warnings in 2024. Of course, listed firms are a relatively small sub-section of the overall DB market of approximately 4,900 schemes, but nonetheless the cost and administrative burden of a DB scheme is clearly top of mind for firms across Britain.

The business case for DB pension derisking: member security with less risk

For DB schemes at the smaller end of the market, relieving their corporate sponsors from the ongoing pressure of funding the scheme can make all the difference, enabling them to focus on delivering and investing in services for future generations. Responsible companies and trustees are laser-focused on ensuring their members receive all of the benefits they’re entitled to, but the cost, risk and administrative burden can be hugely challenging. Moving their schemes to a bulk purchase annuity (BPA) with Just frees them from the risks that come with managing and funding a DB scheme and comes with complete reassurance that Just will continue to support their current and former employees in achieving a better later life.

We’re proud of the work we’ve done to help British companies to support their DB member benefits. The many companies who’ve turned to us include Timpson – the cobbler and key-cutting stores that have been a family-owned high street staple for decades, with a well-earned reputation for prioritising the well-being of their staff. Our £97 million transaction covered 1,063 scheme members.

Another recent transaction was for First Milk, a co-operative dairy business owned by British family farms whose ethos is all about nourishing the earth for future generations and for which it has being certified with the prestigious B Corp status. For First Milk’s DB pension scheme we secured the future member benefits for 452 members in a £42 million full scheme buy-in.

In these, and the many (over 500 to date) other similar transactions we’ve completed, (such as Brains Brewery, Standard Group,  New Crown Motor Sales), securing member benefits has been the focus for the trustees and sponsors.

British companies driving employment, innovation and the long-term transfer of skills impact every sector from the arts to manufacturing, fishing to housing and include charities, churches and titans of our high street. Removing the burden and risks inherent in managing a responsible DB pension scheme helps them to focus on their core businesses without worrying about their employees’ retirement.

Are you a trustee or sponsor looking to reduce DB pension costs and risks? We’re always here to talk in person or provide an indicative price in minutes via our online buy-in pricing platform Beacon. Talk to us about a DB de-risking