Pensions Investment Review: Trustees, Surpluses and Purpose

It’s not often we get to talk about pensions in terms of opportunity — but that’s exactly where we are. After years of focusing on deficits, many schemes are now approaching surplus, and that shift opens up a whole new conversation. With the government’s Pensions Investment Review and Mansion House reforms encouraging us to think about “productive finance,” trustees are being asked to look beyond the familiar and consider what’s possible.

I recently joined a roundtable hosted by Pensions Age and Legal & General to explore what this means in practice. As someone who spends a lot of time thinking about endgame strategy and risk transfer, I found the discussion both energising and grounding. It reminded me that trustees have a real opportunity — and responsibility — to lead with purpose, not just process. These are some of the reflections I took away.

Beyond the Buyout Mindset

For a long time, buyout has been viewed as the natural “end game”. But that assumption no longer fits every scheme. In my view, the question isn’t “run-on or buyout?” – it’s about setting the right timeframe and objectives for your scheme.

If a pension fund is likely to be around for some time, there’s a real opportunity to use its assets to deliver value beyond the balance sheet. It’s worth exploring supporting communities, infrastructure, or the environment, even if this feels unfamiliar.

However, running on isn’t without its challenges. Trustees must consider the strength of the covenant, how any surplus is treated, and who ultimately owns or controls those assets. If a scheme is fully funded on a solvency basis and chooses to run on instead of transacting, that’s a deliberate choice – and one that carries its own risks. Without a clear framework, we might think we’re adding protection when, in fact, we’re shifting risk back onto the sponsor. This needs to be carefully considered.

Rethinking Fiduciary Priorities

In this changing landscape – where many schemes are moving from deficit to surplus, and trustees are being encouraged to think about productive finance, sustainability and long-term purpose – it’s important to pause and ask: what are we really prioritising?

Is it discretionary increases, administration quality, member communication, or long-term return? Each scheme’s answer will be different, but without taking that step back, we risk focusing on the wrong things.

Much of the current guidance still assumes schemes are closing deficits, not managing surpluses. There’s a gap in direction here, and trustees need confidence and clarity to make balanced decisions.

Professional trustees have an important role to play in this context. With so much information circulating, the ability to cut through the noise, lead the conversation and point trustee boards in the right direction is vital. Rapid acquisition of knowledge and the ability to translate it into clear options is what helps us make good decisions.

ESG as a Catalyst for Engagement

When it comes to ESG, I see an enormous opportunity to connect with members. It’s one of the few areas where people genuinely engage with their pension. When members are asked about ESG-related issues, we tend to get some response – which is rare.

For me, this isn’t about ticking boxes or producing reports. It’s about using our members’ money in ways they understand and care about. ESG can be a bridge between what we invest in and what members value. That’s something we should build on.

Use the Carrot, not the Stick

Finally, as government and regulators look to encourage more investment in productive assets, I would urge them to favour guidelines over mandation. Frameworks and clarity are helpful, but compulsion risks narrowing focus and discouraging innovation.

Our role as trustees is as the stewards of member interests. With the right clarity and consistency, we can play a powerful role in supporting both financial and societal outcomes.

We are, undeniably, in new territory. But with thoughtful governance, open discussion and a willingness to challenge old assumptions, trustees can help shape a more resilient and purposeful pensions landscape for the future.

At IGG, our Risk Transfer team works with trustee boards to design and deliver endgame strategies that are right for each scheme – whether that’s preparing for buyout, exploring run-on, or optimising risk management along the way.

If you’d like to discuss how we can support your scheme’s journey, please get in touch with us.