While investment returns remain the top concern for UK pension schemes, regulatory risk has risen to second place, up from fourth position in 2023, according to research by global professional services firm Aon.
Its biennial Global pension risk survey, which surveyed 230 UK defined benefit and defined contribution schemes for its 2025/26 edition, also found that the risks faced by UK pension schemes have become increasingly complex, highlighting a need for risk and opportunities prioritisation. Additionally, the risk severity that could threaten schemes’ ability to pay member benefits has changed since the last survey.
Data and benefit risk was found to be as a key priority, ranking above interest rate and inflation risk. Concerns about longevity and covenant risk remain unchanged, ranking in third and seventh positions respectively, while liquidity risks are at the bottom of the list.
Matthew Arends, partner and head of UK retirement policy at Aon, said: “Those running pension schemes continue to face uncertainty as they grapple with new forms of volatility. While the macro-economic environment has remained challenging, the focus on pensions by consecutive governments has also led to increasing volumes of regulatory change.
“It is not surprising to see regulatory risk climbing high on the agenda and continuing to preoccupy both sponsors and trustees. The survey results underscore the volume of new rules and regulations already required of schemes, but also that regulatory change is expected to continue. For example, the changes from the Pension Scheme Bill, announced in June, which are unlikely to be the last major regulatory development the industry will face over the next few years.”
Alastair McIntosh, partner at Aon, added: “This iteration of the survey saw data and benefit risk come to prominence. This is almost certainly driven by trustees increasingly recognising the importance of data quality and benefit accuracy before they can undertake key activities such as GMP [guaranteed miimum pension] equalisation exercises, dashboard-readiness or bulk annuity transactions.
“Looking ahead, it will be interesting to observe how schemes’ decision-makers prioritise time and resources to respond to the ever-changing macro and regulatory environments. It will also be interesting to see the development of AI in pensions. No respondents raised AI as a risk for their pension scheme, but we expect it to be a key topic to return to in future global pension risk surveys.”
