A buy-in too far

Recurso electrónico / Electronic resource
A buy-in too far / Ren Lin, Callum Duffy
Sumario: In recent years we have witnessed the rising popularity of bulk annuity buy-ins among UK defined benefit pension schemes that is, where the scheme purchases the bulk annuity as an investment but retains legal responsibility for paying the members' benefits. Buy-ins have many appealing characteristics: they hedge longevity risk; closely match cashflows for pensioners' liabilities; bear very low credit risk; and should be convertible into a buy-out with the same provider (which then takes on the legal responsibility for paying the members' benefits). Given all these benefits, it is not surprising that buy-ins are considered part of the toolkit when a scheme becomes better funded