Winning the buy-out game: Investment tactics for pension schemes

22 July 2026

Ever since September 2022, when the mini-Budget accelerated funding timelines, many mid-sized and smaller DB pension schemes have found themselves unexpectedly close to the full-time whistle.

Managing an investment portfolio in the final stretch isn’t about sitting back and running down the clock. It requires a highly coordinated, liquid formation to lock in those gains and ensure a frictionless transition to an insurer.

However, while tournament football provides the high-stakes drama, the actual process of getting a team to the final stages calls for the long-term infrastructure, backing and daily discipline of an elite club.

To understand how a modern, buy-out focused investment strategy operates, we need to look at the entire club hierarchy – from the boardroom to the pitch.

Club chairman – The sponsoring employer

Before any tactics can be drawn up on the training ground, you need to understand the financial muscle behind the club. The sponsoring employer is the club chairman – backing the team, underpinning the covenant and setting the overall direction of travel.

But even the most ambitious chair cannot deliver success alone. What matters is how well that ambition translates on to the pitch. In a pension scheme context, this means alignment. The sponsor provides the support and the setting, but achieving a successful buy-out depends on a shared understanding of the end game and a plan to get there.

When that plan is in place, the rest of the team can execute with clarity. When it is not, progress can quickly stall.

The management team – The trustees

The trustee board acts as the management team. They have ultimate responsibility for the squad, defining the end-game target and making the final decisions. It’s their job to keep everyone focused on the ultimate goal – securing members’ benefits through a successful buy-out with an insurance company without taking unnecessary risks along the way

The coaches – The Scheme Actuary and investment consultant

Behind every successful manager is a coordinated coaching team. The Scheme Actuary and investment consultant must work hand in hand as joint tactical coaches.

The actuary monitors match fitness – tracking the funding level against insurer pricing to block any unexpected shocks. Meanwhile, the investment consultant designs the playbook, ensuring the asset strategy reacts appropriately to the actuary’s evolving assessment of the funding position. Together, they prevent the team from chasing reckless, flashy tactics.

Goalkeeper and defence – Liability matching assets

Your liability matching assets – typically gilts and liability-driven investment (LDI) funds – are your goalkeeper and back four. Their only job is to absorb market pressure and defend your funding position against interest rate and inflation volatility.

When you’re close to buy-out, you cannot afford any defensive slips. Your focus should be to ensure your hedge ratios are tightly aligned with your liabilities. Otherwise, a sudden market swing could undermine your funding position just as you are ready to approach the insurance market.

Midfield – Liquidity management and capital preservation

With credit spreads tight, chasing yield is a foul. Lock in liquidity instead.

Your midfield controls the tempo and ensures a smooth transition. For schemes targeting a short- to medium-term exit, complex, illiquid assets are completely out of the question. You need to be nimble.

However, with corporate credit spreads remaining incredibly tight, simply loading up on long-term corporate bonds isn’t the easy answer it used to be – there’s simply not enough reward for the risk.

Instead, your midfield engine room needs to focus on a diversified mix of highly liquid, low-risk assets like cash and short-dated bonds.

Punting on tight credit spreads doesn’t make sense right now. Instead, short-duration bonds allow you to lock in decent yields and maintain liquidity without tying up your capital or taking on unnecessary credit risk.

This safeguards your hard-won capital and gives you the flexibility to move instantly when the right insurer offer lands.

Attack – Trimming the squad and execution speed

A fragmented portfolio is a slow portfolio. Streamline your assets before approaching insurers.

Your attack is about clinical execution as soon as an opportunity opens up. Insurers are active and ready to trade, but a deal can still lose momentum if your assets are slow to transition. With scattered funds across a fragmented and clunky structure, you run the risk of missing the optimal market window.

Your star striker is a streamlined, transparent asset line-up. By actively cleaning up your portfolio and eliminating operational friction across pooled investments, you create a portfolio that’s incredibly easy to transition.

This proactive setup means you can move from a quote to a completed transaction at lightning speed, locking in the best possible terms without costly delays on the goal line.

That said, many portfolios will include some exposure to growth assets – such as equities, property and diversified growth funds (DGFs) – particularly those that have driven funding improvements in earlier phases. These can play a useful role in enhancing returns. But as you approach the buy-out window, they must be carefully managed. Illiquid or complex arrangements can quickly become a bottleneck.

In this context, growth assets become more like impact players off the bench rather than the focal point of the attack. Where retained, they should be high-conviction, well understood and, crucially, capable of being realised efficiently. Otherwise, the discipline is to trim them back in favour of assets that support speed and certainty of execution.

Ultimately, the winning attack is not the most exciting one – it’s the one that converts quickly and decisively when the opportunity presents itself.

Backroom staff – Other essentials

You cannot win a championship with the starting eleven alone. A huge amount of work happens behind the scenes. While my focus is strictly on the investment engine, a successful buy-out relies heavily on other specialists getting their areas right.

Crucial factors like data cleansing, benefit clarification and the deeper nuances of sponsor affordability all require careful, expert consideration.

As the investment consultant, I don’t manage these complex workstreams directly. But I know that when the wider advisory team gets the data and the sponsor alignment sorted, it gives the investment strategy the perfect platform to succeed.

The final whistle

The investment strategy for the end game is entirely different from the strategy that got you there. You don’t need to take unnecessary risks to score goals. You just need to secure the win you’ve already engineered.

That means a bulletproof defence of liability-matching assets, a highly liquid and tactical midfield that doesn’t overpay for credit spreads, and an agile, streamlined portfolio ready to execute the transaction at pace. The portfolios that match this disciplined formation are the ones that will deliver a full-time win for members.

Is your squad ready for the buy-out window?

Contact me if you’d like to discuss your scheme’s end-game tactics.