UK pension scheme trustees should take a more active role in holding insurers accountable for member outcomes and sustainability approaches when considering buyout transactions, Zedra has said.

Zedra managing director, Kim Nash, highlighted the “significant” increase the industry has seen in pension schemes completing buyout transactions across the UK.

She said this shift is having a “noticeable impact” on the balance of investments in the market and on broader systemic risk, raising important questions for consideration.

“For years, and under their management, trustees have embedded sustainability considerations into investment strategies, setting clear stewardship priorities and pushing for responsible asset management,” Nash said.

“At the point of risk transfer, trustees cease to have control over the assets held and the stewardship principles being adopted.” 

She noted that, in the past, price had been the dominant consideration in insurer selection, but the industry is beginning to experience a shift in this trend.

Nash explained that schemes are now better funded reducing the need for employer top-ups.

She said that this improvement in funding allows trustees to focus on other “critical” factors such as member experience, cultural alignment, and sustainability credentials.

“This is the last chance for trustees to really push for full transparency on how members will be dealt with and what the member experience will look like post transaction,” she added.

Nash also emphasised that trustees should leverage this position to ask questions of insurers on their sustainability commitments, suggesting that they should insist on concrete data rather than broad assurances to evidence environmental, social and governance impact.

“The more trustees focus on these factors and ask questions, insurers will have to think about their responses and how they can evidence them driving change within the market,” she said.

She argued that trustees should ensure their voices are heard at this “critical” part of the process, to protect member outcomes and long-term futures.

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