Truell claims buy-out “reinsurance” is “superfunds through the back-door”.

I recently reported on the Bank of England and Prudential Regulatory Authority’s concern that Insurers were passing on the management of assets and liabilities via reinsurance using captives in Bermuda and other offshore havens.

This strikes the common reader as a bad idea, we want our pensions paid in a clear and transparent way. The article was read by Edi Truell who commented in my Agewage and Pension PlayPen linked in group,

For those who aren’t members, here is what Edi had to say about the matter.


When I started Pension Insurance Corp we set up our own offshore captive, as a conduit for longevity reinsurance and also to invest our own solvency capital into productive assets. The FSA did not like the idea of insurers investing into productive assets such as a portfolio of top venture funds, so put pressure on to have it stopped. Pension Insurance Corp now uses funded reinsurance in considerable scale ( its all in the regulatory filings so I’m not saying anything non public domain).

To a considerable extent this is ‘SuperFunds’ – so harnessing external capital to backstop pensions and investing into more useful assets than gilts – BUT by the back door, in an opaque manner away from the oversight of the regulators, and reeking of hypocrisy

Time to

– immediately remove the ‘gateway’ test that (anti-competitively) favours insurers over superfunds

– have tPR use its powers to allow pensioners of bust companies to actually get the pension they were promised, rather than being locked into a sub-par ‘PPF+ buyout’- promote shared outcomes, to give the members a slice of the upside

– clearly give backstop capital providers the certainty of being allowed to make a return on their capital.

I am encouraged that in a recent submission to the Work and Pensions Committee , TPR appears to be coming round to Edi’s point of view

We support consolidation and alternative options to buy-out where it improves outcomes for savers….

Recent improvements to funding levels have meant that more schemes are now able to consider buy-out and this has led to an increase in demand for quotes. While we know that insurers are innovating to meet this increase, we expect capacity of the buy-out market is likely to be limited. How quickly schemes can put themselves in a position to be ready to come to market and the ability of insurers to flex to meet this demand will determine the scale of any capacity issues. With risk transfer deals in the region of £40-50bn p.a. in the last few years[2], in the context of c£1.4tn in DB assets, there is a significant potential gap.


Being funded at the right level is just one factor in terms of moving forwards with a transaction to buy-out. Many schemes will need to focus on other aspects before they are able to do so, such as: ensuring that the scheme data is accurate and up to date (poor data can lead to a significant additional premium on any buy-out price), setting the right investment strategy to manage risks in meeting the aim of buying out, and having a pool of assets that is attractive to the insurer.
Buy-out is not the only option. Schemes can continue to run on and there are many reasons why this may be an appropriate option for both the trustees and sponsors. In recent years, we have seen alternative commercial models being developed. Superfunds have emerged as an alternative for trustees seeking to consolidate but are not yet able to buy-out. TPR has been operating an interim regime[3] for the assessment of these consolidators since June 2020 (in the absence of specific legislation). To date one Superfund, Clara Pensions, has completed the assessment process.
Alternative arrangements for consolidation and other forms of risk management are already available or coming to the market. These range from financial arrangements that may help trustees deal with specific risks, or get them to a particular goal, to governance-type arrangements that aim to help trustees improve the day-to-day management and/or make the management of the scheme more efficient.
This is an area for further growth and innovation and the more viable options schemes have available to them the better. We will be publishing guidance for trustees setting out the issues they should bear in mind when considering these alternative models.

Innovation and growth in consolidation models is particularly relevant for smaller schemes. While elements of the buy-out market and alternative models do cater for the smaller end of the pensions landscape, it is likely that these will be more focused on larger schemes. Larger schemes with access to specialist advice may be in a better position to prepare for buy-out. With c28% of schemes having less than £10m in assets[4] (increasing to c72% with less than £100m), there are a significant number of smaller schemes in the DB landscape that need to be catered for. We believe there is space for further work to support the market and consider how smaller closed schemes can better access buy-out and wider consolidation options, particularly as their funding improves and they near their end game.

It is right to have alternatives to buy-out. I support Edi Truell in his campaign to make that happen and am pleased to see him contributing to the debate in this way.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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