Supporting pension de-risking transactions: the custodian’s perspective

Defined benefit (DB) corporate schemes in the UK continue to “de-risk” their funding deficits using insurance-based strategies. The use of tools such as bulk annuities and longevity insurance has exploded recently; the value of pension buy-ins and buy-outs alone has exceeded £25 billion in the past two years.

Less well-known is the role of the custodian and asset servicer in supporting insurance-based de-risking. Mark Austin, Head of Insurance for Europe, Middle East and Africa at Northern Trust, explains that its expertise in areas that are significant in executing these transactions – asset reporting, safekeeping, valuation, risk management and the movement of collateral – has seen it increasingly involved in providing support here. Deals have spanned the use of longevity insurance and bulk purchase annuities, particularly buy-ins, where the insurer assumes responsibility for meeting all or part of the scheme’s pension commitments, but the scheme maintains its relationship with members.

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Supporting documents

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