Record levels of buyout activity in 2025 are creating fresh challenges for the UK’s smallest defined benefit (DB) schemes, with insurers increasingly selective about which transactions they take on, analysis from Isio has found.

While funding levels have improved across the sector, the analysis warned that micro-schemes - those with fewer than 100 members - are struggling to progress towards their endgame due to mounting operational and capacity pressures.

Of the UK’s 5,000 private sector DB schemes, nearly 2,000 fall into the micro-scheme category.

Isio said that despite often being well funded, these schemes face persistent roadblocks across administration, data, investment and broking, which can undermine their ability to compete for insurer attention.

Administration capacity remains one of the biggest constraints, as administrators prioritise larger mandates, leaving micro-schemes frequently at the back of long queues for essential projects such as GMP equalisation or preparing data for insurers.

Even minor data inconsistencies can have an outsized impact, as small schemes lack the volume of membership to mask missing or historical errors, warned Isio.

The firm also stressed that early data cleansing was "critical" to building insurer confidence and avoiding extended timetables.

It explained that while larger schemes have built routine, well-resourced data programmes in recent years, micro-schemes typically lack the budget or in-house capability to undertake equivalent work.

As a result, they risk higher advisory costs and longer delays despite being financially ready for buyout.

In addition, micro-schemes often face lower priority from brokers or receive support from teams with limited specialist experience, reducing their credibility with insurers and, in some cases, preventing them from securing quotations at all.

Therefore, Isio said that selecting a broker with proven micro-scheme expertise was becoming "increasingly important" to opening the door to competitive pricing and meaningful insurer engagement.

Indeed, the analysis argued that with the right preparation and targeted support, many of these barriers can be overcome, enabling smaller schemes to move more quickly and securely towards buyout.

It suggested that targeted, proportionate data exercises can help bridge this gap, producing insurer-ready records at lower cost and allowing trustees to make full use of their funding position.

Meanwhile, for schemes that are not yet fully funded, Isio said consolidation vehicles can offer an interim solution, providing a structured way to manage assets until they reach the required premium.

It added that trustees who prioritise data validation, align assets early and work with advisers who can coordinate activities across administration, investment and broking stand a better chance of overcoming delays and maintaining control of their timelines.

Isio concluded that a joined-up approach, combining early data cleansing, practical asset alignment, and specialist broking, is emerging as the most effective route for micro-schemes seeking insurer engagement.

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