Pensions World

The former chairman of the Pensions Regulator, David Norgrove, is launching an insurance company to deliver de-risking solutions to UK defined benefit (DB) pension schemes. Long Acre Life, set to gain Financial Services Authorisation, in early January is targeting schemes with liabilities in excess of £500m, with the aim of delivering cost savings of up to 20% over traditional insurance buy-outs.

“To date, there has been a lack of viable and affordable solutions in the market to help pension schemes reduce the levels of risk that they are running. This should change outcomes for both schemes and sponsors," says Mr Norgrove.

The initiative – which has been designed by PensionsFirst, a solutions provider to the global DB pensions industry and shareholder in Long Acre Life – will create a mutual insurance solution, owned by schemes, sponsors and outside investors. Similar to captive insurance it is hoped that the company will delivers both a lower cost of buyin or buyout for pension liabilities and the removal of associated balance sheet volatility.

While the cost of buy-out varies according to the specifics of each scheme, they have typically been priced at approximately 140% of the IAS19 liabilities and generally been regarded as unaffordable. By allowing sponsor and pension schemes to participate in the insurance profit that would otherwise accrue to a third party insurer, Long Acre Life aims to reduce the ultimate cost of buyouts to around 120%.

www.longacrelife.com