Back To Buy-In Basics

The defined benefit pensions landscape has seen a fundamental shift from deficits to surpluses over the last few years.

This has led to a substantial increase in the number of schemes buying in (and, in many cases, ultimately buying out) their liabilities with an insurer, with many more actively considering their endgame options. However, before launching a buy-in project, there are a number of questions that trustees and employers should be asking.

What is a buy-in?

Buy-ins (or bulk purchase annuity contracts) are increasingly used to manage risks in defined benefit pension schemes.

Under a buy-in, the scheme trustees hold an insurance policy, with the cashflow stream provided by the policy matching the payments of the benefits insured. Buy-ins can be undertaken as a long-term scheme investment or, where trustees intend to secure all liabilities and wind-up the scheme, as a transitional stage prior to the endgame of a buy-out.