Don’t let your company pension scheme come back to haunt you

For the first time in two decades, finance leaders can look at their defined benefit pension schemes and feel a sense of calm. Funding levels have improved, volatility has eased and for many companies, the days of emergency board discussions about liquidity or deficits feels like a distant memory.

But the comfort of stability can be misleading. When something stops demanding attention, it’s easy to assume it no longer needs it. Pension schemes that once dominated management time have quietly slipped into the background. And that’s precisely why they now deserve a second look. Don’t let your pension scheme come back to haunt you. Isio DB journey planning experts, Ed Wilson and Karen Gainsford, share their views on what finance leaders should be considering.

The end of the pension ‘problem’?

The best time to make a long-term decision is when you have options. Right now, finance leaders have more pensions options available to them than ever.

Only a few years ago, defined benefit schemes were viewed as a drag on the balance sheet – unpredictable, cash-hungry and difficult to manage. But falling liabilities, improved funding and maturing governance have left many schemes in a far stronger position, with a clearer line of sight to their long-term goal.

Insurers are active for schemes of all sizes, with new entrants providing extra capacity, and consolidation models providing schemes with access to strong governance in a cost-effective way. For finance leaders, that means there is no single prescribed route forward – but there is an essential need to choose one.

For finance teams the newfound relief at no longer having a pension-shaped headache may feel justified, but it also comes with a risk. When pension schemes no longer cause problems, they tend to lose ownership sitting somewhere between finance, HR and trusteeship, meaning that when they are not burning, they are often left to run quietly in the background, consuming time and money without a clear long-term strategy in place.

In this state, a pension scheme is like a business unit without a plan – steady enough for now but drifting without direction.

The decision you only need to make once

Almost every defined benefit scheme will, sooner or later, reach its endpoint and ultimately be fully insured. The question for finance leaders is not ‘if’, but ‘how’, and on what terms.

Deciding on the route to your endpoint brings stability and peace of mind, a bit like completing a house purchase. You research, compare options and weigh up what matters most – location, cost, potential – before deciding which one feels right. Once you’ve signed and moved in, you stop browsing property listings and start making it your own.

Unlike buying a house, the decision on your pension scheme is one you only need to make once. And with a clear strategy is in place, implementation can be delegated with confidence. Whether you decide to pass the scheme to an insurer, run it on to extract value from surplus, or join a consolidator to reduce costs, the critical step is the same: make the choice.

Knowing when the time is right

It’s easy to assume that a decision this significant should be tied to external conditions: interest rates, insurer appetite or regulation. In reality, choosing the right option will be about what you want the scheme to achieve for the business.

For some, that will mean transferring risk and simplifying the balance sheet. For others, it will mean retaining the scheme and manging it deliberately to realise value over time. What matters is that the decision, when it is made, is thoughtful, and on your own terms.

A deliberate review of your pension strategy doesn’t have to mean rushing to pass your scheme to an insurer. It means articulating a direction, knowing whether the scheme’s future sits inside the business or outside it, and making that position clear to those who need to know.

Defining a clear pension strategy as CFO

Re-engaging with the pension scheme isn’t about reopening old headaches; it’s about reclaiming control. For too long, schemes have existed as legacy items on the balance sheet – sometimes significant in size, but peripheral in strategic decision making. This disconnect is increasingly untenable.

Finance leaders don’t need to become pension specialists, but they do need to own decision making around their scheme’s future. They are the ones with the broad view of corporate strategy, capital allocation and risk appetite – the context in which any pension endgame must fit. Once that framework is defined, pension specialists can take the controls. finance leaders need to address two important questions. Strategically, is the plan to run the scheme on or insure as soon as possible? Operationally, does the scheme work alone or consolidate with others?

The act of deciding is powerful in itself. The clarity and discipline it provides sends a clear signal to investors, analysts and employees that the business manages long-term obligations with intent, rather than being hostage to inertia.

Make the choice while the conditions are right

For once, the external environment is aligned with internal readiness. Schemes are healthier, markets are active, and innovation is expanding the menu of endgame options. But this isn’t about timing the market – it’s about defining your future relationship with the scheme and ending the drift.

Choosing a direction for the pension scheme may not feel like the most urgent line item on the agenda, but the cost of inaction could come back to haunt you. A pension scheme left without a clear endgame will eventually demand attention again, and by then, the decision may be harder to make.