Pension Insurance

Market opportunities

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Solvency funding levels

Over the course of 2013, solvency funding levels have improved for many schemes due to a combination of rising gilt yields and good returns on equities.  This has made pensioner buy-in  a feasible option for many schemes. In addition, some companies are currently exploring the possibility of full buyout of their schemes with only modest top up contributions required.

Medical underwriting

Medically underwritten bulk annuity policies could potentially reduce the cost of a pensioner buy-in by up to 10%.

Four bulk annuity providers have begun offering enhanced annuities on this basis, and several of these deals have been announced (see “news and views” section for more information. As this is a new area, insurers are keen to write business and consequently competitive pricing may be available. Please contact us if you would like to explore this further.

Medical underwriting has been a popular feature of the individual annuity market for some time and looks set to have a big impact on the bulk annuity market too. This potentially works best for smaller schemes where trustees are aware of health issues and schemes where liabilities are concentrated in a small number of individuals. This can also be an effective way of addressing the concerns that insurers have where schemes have undertaken liability management exercises (such as Enhanced Transfer Value exercises).

Deferred premiums

Many insurers are now willing to allow the sponsor to defer payment of all or part of the premium when taking out buy-in policies. This addresses the concerns that many companies have around the affordability of insurance solutions. This is something that is increasingly becoming available on smaller deals as well as the larger ones. There are different ways in which the deferral of the premium can be structured - if this is something that you are interested in, please contact us for more information.