Are you buy-in ready?
17 Oct 2019
Preparation is everything
The buy-in market is busier than ever. More and more schemes are finding that buy-in, and even buy-out, is affordable.
However, rushing to insurers without careful preparation is unlikely to give the best results. A more informed and well-prepared approach to market will be rewarded in the busy environment.
To stand out from the crowd, pension schemes now need to “sell” their transaction to insurers to get the best engagement and obtain the most attractive pricing on offer from insurers.
How to stand out from the crowd
Insurers are selective and want to work with schemes that are confident in their ability to transact rather than more speculative requests which could fall away later down the line.
Some of the key areas and questions which trustees and sponsors should focus on are:
- Strategy alignment – What is the scheme’s long term objective? What size of buy-in is affordable? Which assets would fund a buy-in? What is the target price for a buy-in?
- Market knowledge – Do all parties understand buy-in? What pricing is achievable? Which insurers have appetite for our scheme and what approach will get us optimal pricing?
- Governance – Are all stakeholders supportive of a transaction? Would a joint working party help nimble decision making and taking advantage of short term opportunities?
- Data – When was the last member tracing exercise completed? Should we collect marital status information? Would any data cleansing pre-transaction lead to improved pricing?
- Benefits – Has the benefit specification been reviewed by the lawyers? Are there any outstanding benefit queries?
We’ve provided some other considerations here.
Making informed decisions and taking appropriate action on these areas will ensure you are well-prepared and best placed to take advantage of insurers’ best pricing.
Once schemes are “buy-in ready” they can confidently approach the selected insurers and clearly demonstrate the positive preparations taken.
Now, more so than ever, an informed and well-prepared approach will give the best results - not only boosting efficiency but also giving the best pricing available.