Held as an asset of the pension scheme, a pension buy-in is a bulk annuity contract that covers the same as all of the benefits for a subset of the scheme members. The bulk annuity contract protects the scheme against increases in the longevity of covered beneficiaries, as well as insulating the scheme from changes in investment returns, interest rates and inflation. The buy-in can be tailored to transfer specific risks if required.
The most common approach to permanently settling pension liabilities is to purchase a bulk annuity covering 100% of scheme benefits and then split the bulk annuity into individual annuity policies for each pension member. The scheme can then be wound up.