The money behind annuities “matters” too!

Important research into how insurers are making the money behind annuities matter

We tend to forget that a very large amount of the money yet to be paid as pensions , is backed by funds held by insurers and that money is invested, not just in gilts but in a wide variety of income producing assets capable of meeting the promises made originally by pension schemes or by the insurers themselves, at the point when an annuity is sold.

Annuity specialist Retirement Line has started to research the annuity providers it uses to get its customers annuities.  I work with Mark Ormston to better understand what is going on and Mark has supplied me with a summary of Retirement Line’s research into the ESG initiatives within the life companies. This money matters every bit as much as the money accumulating in DC pensions (which do not invest in  annuities) and DB pensions (which sometimes buy-in annuities to reduce longevity risk)

This research is the first I have seen of its kind and I hope it will be picked up by firms monitoring the progress of insurers towards their climate goals. All too often, the high-profile flagship products, GPPs and Master Trusts get all the attention. We cannot let in house funds get left behind. Well done Retirement Line for kicking this off. Let’s hope they can use their distribution clout with insurers to drive positive change.

ESG investment considerations within annuities



Are working on pinning down by year-end some more succinct public messaging on this front, however, in the meantime, they have quite a lot out in the public domain already, eg particular asset deals where they have issued press releases (e.g. green trains, wind farms, sustainability-linked commercial mortgage loans), articles they have done in Pensions Age and the Sunday Times, their green asset investment commitment that they made in 2015 (which they met well ahead of time: they now have c. £6bn of green assets across Aviva) and their wider Aviva commitment to £10bn of UK infrastructure and real estate investment which was announced by Amanda Blanc our CEO recently.

In 2020:

Galloper wind farm

Aviva supported a UK renewable energy project with a £131m loan to finance offshore transmission assets for a wind farm off the Suffolk coast. Each year, the Galloper Offshore Wind Farm’s 56 turbines generate enough green electricity to power the equivalent of more than 380,000 British homes.

Big Yellow

Aviva lent £35m to support the Big Yellow self-storage company, including an agreement that they would add solar panels to their facilities.

Coastal Housing Group

Aviva entered into a corporate debt facility for a, not for profit housing association with 6000 homes under management



Completed a £75 million Private Placement on behalf of the Aviva UK Life annuity business with settle, the not-for-profit housing association which manages over 9,000 properties across Bedfordshire and Hertfordshire.






Canada Life

The link below that provides some info.

However, they are working on a full policy.  This will probably not available for 6 months.




This is a statement issued by Just

The United Nations has set out sustainable development goals that businesses who value sustainability have a moral obligation to align to as best they can. We will aim to make a positive difference to those goals that we can directly affect and make a concerted effort to not harm others.

Many efforts we are already undertaking across the business are aligned to these goals and contribute to our becoming a sustainable business. Some examples of these are:
–  conscious changes to our investment strategy to increase our involvement in sustainable practices and away from unsustainable ones;
– creation of the diversity and inclusion strategy that David Richardson is championing;
– continuing our efforts to reduce our own carbon footprint;
– embedding the possible impacts of climate change into our risk management activity.

Last month debt investors subscribed £250m to our first Green Bond, which suggests they have strong confidence that we are creating a green sustainable business. All of this activity should improve our Environmental, Social and Governance (ESG) credentials (the measures that others will assess us by).


Legal & General

LGR (Legal & General Retirement – the entity that conducts annuity business) consists of two parts: LGR Institutional, which transacts worldwide pension risk transfer (PRT) business, and LGR Retail, which transacts individual retirement business. LGR invests the premiums it receives in a combination of fixed income (or similar, fixed cashflow generating) assets, hedging derivatives and reinsurance contracts to provide a safe and secure cash flow which enables us to back pension liabilities. Most of the asset management services are sourced in-house through LGIM, which executes LGR’s strategic ESG objectives.


LGR has three ESG objectives:


  • Environmental impact through portfolio decarbonisation: to align with the Paris Climate Agreement, support net-zero objectives and reduce our portfolio carbon emission intensity to half by 2030.
  • Social impact: invest in assets which create real jobs, improve infrastructure and tackle the biggest issues of our time – including housing, climate change, fostering an inclusive society and the ageing population.
  • Governance: good investment underwriting requires LGR to identify and manage financial related risks including ESG.


LGR considers ESG to be a primary factor in all of its investment objectives. ESG factors are particularly important in long-term credit risk assessment because, by nature, many ESG risks are low probability and high impact.

The assets which back regulatory and shareholder capital are managed separately to the annuity portfolio. These assets are invested through Legal & General Capital (LGC) in an impact-aware and ESG-aware manner, which further diversifies LGR’s portfolio exposure in equity and real asset markets.

More details on this and L&G’s Inclusive capitalism can be found in L&G Sustainability report

and the following links are to LGIM’s ESG policies

  1. LGIM’s approach to Responsible Investing

  1. Corporate Governance and Responsible Investment Policy


Whilst ESG is considered within the investment process for the assets they hold, they do not have any specific restrictions relating to ethical investing on the mandate that controls the assets backing our annuity liabilities.


Scottish Widows

  • Don’t have an overall ESG score for the annuity portfolio investments, although they will be looking to develop such metrics during 2021;
  • They will be reporting the CO2 outputs that they finance in their annual report and working on the detailed strategy for how they aim to meet the CO2 commitments they have made;
  • Their targets of 50% carbon footprint reduction by 2030 and net-zero by 2050 in their investments cover the whole of Scottish Widows.  Shareholder assets are one part of that strategy although some areas may move at a faster pace than others;
  • For information, the largest sectors they are invested in their annuity fund are long term loans to:
    • UK Housing Associations – funding social housing
    • UK Infrastructure Projects – funding social infrastructure (schools, hospitals, etc), renewables, railways, etc
    • UK Universities – funding higher education facilities
    • UK Real Estate – with a significant investment in the supply of affordable rental properties

Annuity money matters.

Kudos to Retirement Line, an annuity broker that’s thinking beyond the usual metrics of “rates” and considering the social , environmental and governance going on with the money they broke. Let’s hope, in  time, that ESG considerations  become part of all annuity purchasing decisions.  Retirement Line work in the retail space ;  I wonder how much attention is taken by trustees when they buy-out pensioners or buy-in annuities.

I encourage Retirement Line to pick up from this start and create an ESG research lab. They are uniquely placed to help not just their customers but institutional trustees, their advisers and the Governmental departments and regulators charged with ensuring TCFD on all money in the pension system.

The more scrutiny on insurers operating in this space, the better for the planet.  Retirement Line are never shy in self-promotion – on ESG they are indeed….



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to The money behind annuities “matters” too!

  1. Nice article for self assessment , capable of meeting the promises made originally by pension schemes or by the insurers themselves, at the point when an annuity is sold.

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