Buy-in and buy-out

Securing defined benefits with an insurer can be the best option for employers

The risks of unforeseeable costs, open-ended liabilities and noncompliance can be significant for sponsoring employers of Defined Benefit schemes.

Buy-ins and buy-outs give employers the opportunity to eliminate those risks partially or in full.

With a buy-out, employers transfer their pension accountability and risks to an insurance company. With a buy-in, the employer retains some degree of pension responsibility, but the transaction would ensure that the income from the buy-in asset matches the benefits paid to the members covered by the policy.

How can First Actuarial help?

First Actuarial offers a tailored service to identify the right risk transfer solution for your organisation’s needs. Our specialist risk transfer team advises clients on both buy-outs and buy-ins and we work with all the insurers in the market.

For many employers, the cost of buy-out can seem prohibitive.

We understand what drives insurers’ costs, and we’ll set out the steps you can take to make savings. For example, we can estimate the cost of securing your liabilities against your scheme’s asset value and monitor it over time. This makes it easier to spot attractive and suitable risk transfer opportunities as soon as they arise.

Full buy-out is not always the answer. We use our knowledge of insurers and their costs to identify the approach that will deliver the best value for money.

Where the cost of a buy-out turns out to be prohibitive, we will help you consider the alternatives.

We never forget how worrying a buy-out can be for scheme members, as pension provision moves to an unfamiliar insurer. We can take their anxieties away by providing clear and comprehensive information at every stage.

We recommend this step-by-step approach

Step 1: Agree a suitable timescale

Step 1: Agree a suitable timescale

A risk management exercise is often a long-term project requiring responsible proactive management.

If you can’t afford to buy out straight away, a managed delay can get you to full buy-out cost-effectively, allowing good investment returns and additional employer contributions to build up over time.

We’ll take the time to understand your scheme. We’ll talk with you about your budget, your investment risk and your membership profile. And then we’ll set a timescale that works for you.

Step 2: Set the right investment policy

Step 2: Set the right investment policy

Setting the right investment strategy goes hand in hand with agreeing a suitable timescale. It’s about gauging how much your sponsor is willing to pay to control the risks involved in your scheme.

We will help you set the right strategy for you and your sponsor, and monitor it to make sure it remains appropriate for you.

With the Triggers tile of our
Client Hub, you can reduce your investment risks if you find yourself ahead of schedule. This will make it much more likely that you will hit your buy-out target date.

Step 3: Sort out your data

Step 3: Sort out your data

Almost all schemes hold incorrect member data.

Over time, many schemes will have been administered by a series of providers, all with different practices. Legal views have changed too – yesterday’s approaches may not be acceptable today. And administration errors can easily build up.

Your data must be accurate if you plan to undertake a risk transfer exercise, and any Guaranteed Minimum Pensions (GMPs) need to be equalised.

If insurers aren’t confident that the data is in good order, they can charge a significantly higher premium.

Step 4: Set up liability reduction exercises

Step 4: Set up liability reduction exercises

Liability management exercises can reduce your bulk annuity costs. Making an offer to members prior to buy-out can make sense to all parties. It may be financially advantageous to members in certain circumstances, and will also keep your costs down.

To manage any reputational risk and to treat members fairly, it’s important to explain such offers clearly and discuss the issues openly. That way, members will only accept the options you offer if they are right for them.

Why choose First Actuarial?

We offer in-depth experience and structured processes to simplify the complexities of risk transfer exercises such as buy-ins and buy-outs.

Our service delivers great value for money. We work on a fixed-fee basis whenever possible, and with our pragmatic approach we will offer you the most efficient path through to your risk transfer.

We specialise in transactions below £100m which, without the right approach, can be hard to run at a competitive price. A key element of our approach is our strong relationships with all the major insurance providers. They trust us to deliver on our commitments. This allows us to recommend the best insurers for you. Insurers are limited in the new business they can take on, and their first choice will be to work with consultants they trust.

Excellent administration is the cornerstone of a good buy-out process. This involves making sure the data is demonstrably accurate, and giving the insurer the confidence to offer their best price, knowing problems won’t arise later on.

A risk transfer exercise is a complicated process involving complex decisions. Here at First Actuarial we take the time to support you through the process, helping you make informed decisions at every stage.

We’ll work with you and your organisation in an ethical manner, offering the right options to your staff and explaining their options clearly. This will keep costs and reputational risk to a minimum.

Learn more about our buy-in and buy-out services

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Get in touch

Get in touch with one of our buy-out specialists to discuss how we can help you.

We feel reassured that First Actuarial has provided us with advice that is credible, in a way which a lay person can readily understand. This has helped us make informed and far-reaching decisions in a complex area.

Find out more about our Defined Benefit services

Download our Defined Benefit brochure.

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First Actuarial case studies

Amusement Equipment

Amusement Equipment’s Defined Benefit Scheme was costly to run, with unknown liabilities that worried its directors. The company struggled to find a specialist adviser prepared to help wind up its small Scheme.

First Actuarial delivered the outcome we wanted. Everyone is satisfied – both Employer and beneficiaries. Without First Actuarial, the pain of running the Scheme could have continued for years to come. Few actuarial advisers are interested in small schemes like ours, so we struggled for years trying to find someone to help us. However we finally got what we wanted from First Actuarial. To any company in the same situation, I would recommend them without hesitation.



As a result of an unusual clause in their trust deeds, Trustees of the pension scheme sponsored by the Society of British Aerospace Companies (SBAC) funded their liabilities on a buy-out basis.

“First Actuarial are very proactive. They respond quickly and get things done. They have proved to be competent and conscientious, and have a very professional and personable approach to business relations.”


Oil and Gas Industry

Concerns about the mounting costs of a Defined Benefit (DB) Scheme in the oil and gas sector came to a head when a valuation revealed the need for 50% employer contributions. After presenting all the options, First Actuarial supported the...

The costs of running a DB Scheme were continually increasing for a company in the oil and gas industry.

See all our case studies
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