All year I have been writing about the security of buy-ins and buy-outs of occupational pensions in the UK by insurers. I am talking in particular about our insurers that are shipping off assets and liabilities to the USA and Bermuda so that the liability to pay us is swapped from UK regulated funds (backed by the PPF) to what the FT is now calling the “Private Credit Binge” of top rated bonds. These top rated bonds are yielding such large amounts that insurers do not need to hold so many of them as they’d have to hold UK corporate bonds and gilts.
To understand the explosion of these new kind of bonds, the ones that back the bulk annuities that pay us like a pension, here’s a chart from the FT article that I can offer on a free link here.
I am out of my depth on fully understanding the mechanics of turning a safe fund into a holding of these “Rated feeders”, but here’s the FT explanation
Let’s begin at the beginning
It’s that last paragraph that has made these rated feeders and CFOs help American insurers clean up buying into and buying out UK pensions. But that’s where we should be concerned. Our pensions are easy meat for US private equity
But “easy” doesn’t mean secure and the names of the big private equity firms who now own insurers such as Just are listed below.
You think you are out of trouble when being bought out by an insurer?
This whole business of rating the value of debt is based on “track record” of the debt managers and it’s worse than that.
So there you are. Our bought out pension money’s being held by insurance companies that really have no idea what’s going on. Call that “gilt edged”?
So no longer the “gold standard”?
Makes sense I guess – if you’ve sold all your gold offshore in exchange for an opaque paper trail, then you can’t really rely on gold.
Well done to FT. Proper financial journalism. The real question of course is why weren’t the PRA all over this?
Apparently when raised as a concern with DWP, their response was “that’s a PRA area, not ‘pensions’ once it shifts over to insurance regime and that’s the gold standard, isn’t it?”
“Gold standard” = clever logo, sales pitch, easily swallowed.
I think I’ll use “gold standard” going forward – “gilt-edged” is a bit out of date
The motion for this year’s Law Debenture Pensions Debate on 13 May 2026 is: “This House believes that buying out remains the gold standard for DB members.”
The Chair will be Law Debenture’s Pensions Managing Director, Sankar Mahalingham.
Speaking for the motion will be Calum Cooper of Hymans Robertson and Jane Kola of Arc Pensions Law.
Speaking against the motion will be Hattie Clover of Clara and Richard Gibson of Barnett Waddingham.
This will not end well, maybe you should adopt “Fool’s Gold”
as the appropriate label.
It does seem to suggest that Trustees should be very wary of moving from buy-in to buy-out because they are then removing two additional levels of security from members benefits: the sponsor’s guarantee and PPF protection.
Well said Pensions Oldie. Henry the FT article is excellent as it exposes how private credit can be dressed up to appear to be a “good ” investment. This has all the hallmarks of the lead up to the 2008 Global Financial Market crash. Just a matter of time!