When I was a kid I worked for a few months on a trawler. Fish used to come over the side of the boat and be thrown into a big container on the deck.  If you looked into the container you could see them flapping about. “Flap flap flap” when they had just landed then “ flap…flap”, then the odd twitch and then..Nothing. The process took hours; it was distressing for me and very much more distressing for Mr Cod and Mr Pollock and Mr Halibut.

This brings me on to scheme liabilities.

The point of liability driven investment is to knock the liabilities into a comatose state in readiness for their being shipped off to a better place. Being brutal about this, the liabilities- namely the pensions that are going to be paid to the likes of you and me, sit more happily on an insurance company’s balance sheet than your employer’s.

Now back to the trawler. Once these fish had conked out and our quota met we had to got them down into the hold, covered them with ice then legged it back to port so that we could get rid of them while they were still fresh. Every hour was vital as our piscine friends were of little use to anyone if not in prime condition.  As soon as we reached harbour we’d be swinging the fish boxes onto waiting forklifts and hitting the auctions to find out what we’d be paid.

The worst thing was when we got into port only to find other boats lined up at the quay. Sometimes we’d be involved in a harum-scarum chase down the coast to find someplace where the fish factories and markets still had capacity.

The one certainty for the trustees of pension schemes has been the annuity market. The insurance companies have kept their doors open for annuity business through thick times and thin and though the price that trustees have paid the insurers to take their fish- sorry liabilities- off their hands has varied – there has always been a market.

Sometime in 2012, the EU Commission plans to introduce regulation on life insurers that is likely to put up the cost of buying out pensions by between 15 and 20%. It’s likely to reduce market capacity and force a lot of pension schemes to manage out their liabilities over time.

Now if fish sit in fish boxes too long, the ice melts, the fish rot and all the value of the catch is lost. The old adage that if the Equitable Life was a pension scheme it would still be trading today can be reversed.

If most pension schemes were regulated as life insurance companies are today they would not be in business.

Which is why we must be very worried indeed about threats to the buy-out market and very worried for our DC members about the impact on the cost of annuity purchase.

There is a direct link between insurance companies and pension schemes and that link needs to be maintained. They are as important to  pension schemes as fish markets and processing plants are to the trawler man.