In a pension buy-in transaction, Rothesay Life assumes the responsibility to make regular payments to a pension fund to cover a specified portion of the fund’s commitments to pay benefits to its members.

The payments are usually paid monthly to the trustees of the fund and this stream of cash flows becomes an investment asset of the pension fund that offers protection against adverse changes in interest rates, inflation, asset performance and member mortality.

There is no change in the relationship between the pension fund and its members – the fund continues to pay the members their regular benefit payments.

  1. The pension fund trustees buy a bulk annuity contract (insurance policy) from Rothesay Life by payment of a single up-front premium.
  2. Under the bulk annuity contract, Rothesay Life agrees to pay to the trustees specific benefits of all or a portion of the fund’s members and their eligible dependants for as long as they live. These are known as the insured benefits. The responsibility for payments to the members remains with the pension fund.
  3. The trustees maintain links with the corporate sponsor which will continue to include the pension liabilities in its company accounts.
  4. Whilst the bulk annuity is held by the trustees as an asset in the fund it is typically called a “buy-in”. If the trustees initiate a wind-up of the pension fund, the bulk annuity buy-in will be converted to a buy-out (see below).

Pension (Buy-in) How it Works


  1. The pension fund trustees will already employ a pension administrator to pay the members their benefits each month.
  2. Each month Rothesay calculates the amount that is due under the bulk annuity and pays this amount to the trustees a couple of days prior to the date that the trustees’ administrator pays their members.
  3. Each month the Trustees administrator will provide information to Rothesay Life regarding any changes in the insured member population that will impact what Rothesay should pay to the trustees in the following month. (E.g. member deaths, retirement, transfers out).
  4. Bulk annuity payments relating to a specific fund member will cease on the death of the member, and therefore the trustees will be required to engage in regular mortality tracing.


  1. A pension fund can transfer the obligation to pay all future pension benefits to a bulk annuity insurer. This is referred to as a “buy out” and results in the removal of the pension liability from the sponsor’s company accounts.
  2. In order to complete a buy-out, the pension fund must have already insured all of its pension commitments (via a bulk annuity or annuities) or have access to sufficient residual assets to purchase annuities to cover the remaining uninsured benefits.
  3. The bulk annuity contract or contracts are then broken into a collection of individual policies which are then held by the pension fund members (i.e. each member holds their own annuity contract with Rothesay Life).
  4. Once the individual policies have been issued the trustees no longer have the obligation to pay pension benefits and the fund can wind-up.
  5. Where a bulk annuity has been assigned to the members in this way, it is then usually called a buy out.
  6. Note: Most buy-outs start as buy-ins that cover all the benefits and are often called buy-outs through out the process due to the intention to convert to a buy-out.


As Rothesay Life is an insurer regulated by the Prudential Regulation Authority (PRA), we must hold surplus assets (capital). These assets are monitored by the PRA to ensure we can meet the insured payments – even in an economic downturn.

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