Buying-out can be the best option for your DB pension scheme

Many trustees and sponsoring employers want to secure their scheme pension benefits with an insurance company.

As well as making sure that members get their benefits paid, a pension buy-out will lift away the burdens of responsibility and risk. Many employers are concerned about the risk of increased payments into the scheme. For trustees, a buy-out will alleviate the responsibilities of governance.

How can First Actuarial help?

We have a specialist buy-out team that understands the buy-out market. We can explain the dos and don’ts, so if you decide on a buy-out, it will run more smoothly.

Our team can also give an indication of the cost of securing your liabilities and track that for you over time. Once you’re aware of those shifts, you can spot the right opportunity to buy out cost-effectively.

Buy-out can be a worrying time for members, as responsibility for paying benefits moves from the pension scheme your members know to an unfamiliar insurer they don’t. We take the worry out of a buy-out, by giving members clear and comprehensive information that they can understand. This also makes the process easier for you.

For many employers the cost of buy-out can be prohibitive. We understand what drives insurers’ costs, and we’ll set out the steps you can take to reduce the cost.

If buy-out is too expensive now, we can help create a structured plan to make it achievable in an organised way.

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 all 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

Most pension schemes have been in operation for decades, and administration errors will have accumulated in many schemes.

Many will have been administered by a series of providers, all with different practices. Legal views have changed too – and approaches taken in the 1990s may not be acceptable today.

Unfortunately, this means that almost all schemes hold incorrect member benefit data.

Your data must be accurate if you plan to undertake any risk transfer exercise, and any Guaranteed Minimum Pensions (GMPs) now 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 buy-out. And we’ll bring you with us, making sure you understand every step we take.

We understand the buy-out market, and we have great relationships with insurers. They trust us to deliver on our commitments, every time. This is important because insurers are limited in the new business they’re able to take on, and their first choice will be to work with the 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.

We’ll work with you in an ethical manner, offering the right options to your staff and explaining their options clearly. This will minimise both buy-out costs and any reputational risk.

We offer great value. With First Actuarial, you’ll pay a lower price to the insurer for your buy-out, and an affordable fee to us for managing the process.

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

Download our brochure

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

The Kennel Club

Concerned about the risk of an Employer contribution increase as a result of high liabilities, Trustees of the Kennel Club Pension Fund turned to First Actuarial.

“They’re extremely professional and helpful. Their input always seems sound, logical and well presented. First Actuarial handled the transition well, they provide us with helpful guidance, and have delivered what they promised when they pitched for the work.”


Royal Mail

The Communication Workers Union (CWU) enlisted the help of First Actuarial when Royal Mail proposed replacing its Defined Benefit pension fund with individual Defined Contribution arrangements.

“I can’t speak highly enough about First Actuarial – their people have been brilliant. The journey has been inspirational, nothing but a positive experience.”



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.”

See all our case studies
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