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It is becoming increasingly common for defined benefit pension trustees and their sponsoring employers to seek to de-risk their schemes. One way of doing this is to insure them by entering into bulk purchase annuity ‘buy-in’ contracts, often as a first step towards buying them out altogether. These are usually transactions that involve a significant part (or all) of the assets of the pension scheme concerned, and they are largely irreversible.
It is vital for all parties that these transactions are properly documented, with risks for both trustees and insurers appropriately covered off. They also need to be executed professionally and in a way that is sensitive to the timescales dictated by price lock-in periods, dealing dates and trustees’ decision making processes.
Without legal advice delivered by lawyers who are experts in the field, trustees and insurers are exposing themselves to the risk that a contract does not offer them appropriate protection. Also if lawyers are involved who are unfamiliar with market standard terms and/or unable to work to commercially driven timescales, there is a risk of target dealing dates being missed with the result that transactions need to be re-priced and/or adviser fees incurred that are higher than necessary.
Trustees and insurers need legal advisers who understand the market, are commercially robust and can deliver high quality work within tight timescales.
Eversheds Sutherland's pensions insurance team advises on all aspects of buy-in and buy-out insurance policies, including the below.
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Contract terms | Drafting and review of benefit specifications | All risks cover | Premium payment schedules | Quotations and other documents |
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What makes the Eversheds Sutherland pensions insurance team stand out is our strength and depth of experience. We act for every type of pension client, including trustees of occupational pension schemes of all sizes, employers and insurance companies, and we have written standard buy-in/buy-out terms for some insurers. We have unique experience in advising both trustees and insurers, which means that in negotiations we are familiar with the positions of both parties and the common sticking points, and we understand the areas of potential compromise.
We have advised a range of trustees and corporate sponsors on bulk annuity transactions, including:
Recent examples of our work for insurers include:
In conjunction with leading benefit consultancy Aon Hewitt, we have developed a set of pre-negotiated contractual terms as part of a streamlined but comprehensive bulk purchase annuity offering, which includes full provider due diligence. This offers fixed fees and a tightly defined process to control costs.
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