ARTICLE · 10 DECEMBER 2012

A Look At Sovereign Annuities

Matheson

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Sovereign annuities were developed in an attempt to assist employers and trustees to deal with the funding crisis currently being experienced by many defined benefit pension schemes in Ireland.

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Paul Glenfield

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Sovereign annuities were developed in an attempt to assist employers and trustees to deal with the funding crisis currently being experienced by many defined benefit pension schemes in Ireland. A sovereign annuity is an annuity contract where the annual income payment is linked directly to payments under bonds issued by Ireland or any other EU Member State (also known as "reference bonds"). In contrast to the annuity products currently on offer, agreed payments from a sovereign annuity can be reduced if there is an event of non-performance of the reference bonds. This feature will be of concern to pension scheme trustees given their duties under both pensions legislation and trust law generally.

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