Bulk insured pension companies reported an increase in funds under management, totalling £30 billion to the end of 2010, according to new figures released by the ABI today. The pensions of over 600,000 people are now covered by these funds.
Responding to increased interest the ABI and NAPF have today published an updated Bulk-Insured Pensions guidance: A Good Practice Guide 2011 to help trustees understand the process of entering into a buy-out or buy-in bulk insured pension scheme.
The guide will help pension trustees to organise, examine and implement buy-out/buy-in options, as well as highlight key legal and regulatory issues that they will need to consider.
The Guidance includes:
Preparation objectives of a buy-in or buy out, to facilitate a smooth, speedy and focused process
The legal requirements in key areas such as discretionary benefits; partial Buy-ins and the role of the Pension Protection Fund (PPF)
A glossary of terms to translate language used in Buy-in/Buy-out transactions.
Mark Edwards, Assistant Director, Financial Regulation & Tax, ABI comments:
“The number of pensions covered by bulk buy-outs reached over 600,000 and the assets under management was in excess of £30 billion in 2011. It is therefore clear that the insurance industry is able to provide tailored and innovative solutions to suit the needs and circumstances of individual pension schemes; such as longevity-only insurance to mitigate the risk of pension scheme members living longer than expected.
“Pension fund trustees are faced with an ever increasing number of challenges around scheme funding. Insurance company buy-outs and buy-ins can be a very powerful tool for companies and trustees to manage the risks inherent in providing an occupational pension scheme and can also provide greater security of benefits for scheme members.
“Transferring pension risks can be complex and involve many stakeholders. The guide aims to demystify the process for trustees and help them make the process as smooth as possible.”
Darren Philp, Director of Policy, National Association Pension Funds (NAPF) comments:
“As a contribution to the DB de-risking debate, the NAPF welcomes this Good Practice Guide. It is important that trustees, as fiduciaries acting in the best interests of all scheme members, fully understand the key aspects of the bulk insurance solutions available to them as a de-risking tool. This Guide is a helpful source of reference with which to navigate this aspect of the de-risking process. Although scheme specific and external factors will impact upon the pace of de-risking, trustees need to keep the options open to them under review.”
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