Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Buy-in definition

What does Buy-in mean? A buy-in is a bulk annuity (or similar insurance contract) purchased by defined benefit pension scheme trustees from a regulated insurer and held as a scheme asset. The insurer pays the trustees an income designed to match the covered members’ benefits; members’ rights remain against the scheme, and the trustees continue to administer and pay benefits. This contrasts with a buy-out, where liabilities are transferred to the insurer and the scheme is discharged. In practice, a buy-in transfers investment and longevity risk for the insured tranche to the insurer, while residual risks (for example, data, benefit specification and discretionary elements) remain...

Practical guide to reviewing and negotiating pension scheme buy-in/buy-out policies: quotations, benefit specification, pricing adjustments, GMP equalisation, data cleansing, warranties, trustee liability and data protection

Published by a LexisNexis Pensions expert

Practice notes

Although every INSurer produces its own policy documentation, they generally follow broadly comparable procedures and contain parallel provisions. In most cases, the documentation pack will consist of the following elements:

a quotation
a policy document setting out the terms and conditions
an acceptance document

Guidance from the Financial Conduct Authority, as set out in PERG 10.3 Q13, indicates that one-off annuity purchases chosen by the pension scheme trustees are highly unlikely to be regarded as constituting ‘day-to-day’ management decisions under the Financial Services and Markets Act 2000 (FSMA 2000). Trustees can therefore, in those circumstances, select the annuity provider without first being authorised under FSMA 2000, but should only proceed after taking advice from a suitably qualified and experienced financial adviser.

This Practice Note outlines a typical Buy-in/Buy-out process and then examines what the quotation and the policy terms and conditions should contain. For further details on issues arising when considering buy-outs and buy-ins in respect of defined benefit occupational pension schemes, see Practice Note: De-risking—pension buy-outs and buy-ins.

Typical buy-out process

A typical buy-out process may be as follows:

the trustees supply details of the benefits to be bought out, for quotation purposes, to one or, preferably, several insurance...

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Mark Ridler

Hill Dickinson

Mark is a legal director at Hill Dickinson. He qualified as a solicitor in 1986 and, after initially specialising as a corporate lawyer, has advised pension scheme trustees and corporate clients for over 20 years on a wide range of pension matters, including: resolving historic errors in pension documentation; drafting and updating pension scheme documentation; the pensions aspects of corporate transactions and restructuring; the closure, wind up and merger of pension schemes; Pensions Regulator proceedings; the Local Government Pension Scheme; fiduciary management agreements; and auto-enrolment.Chambers 2013 says that Mark is noted for his wide-ranging experience of pensions law and that one peer states: "He's technically very able" and clients have noted in Chambers that Mark offers “good, strong, pragmatic” advice....

Web page updated on 21/05/2026

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