Buy-in basics: A quick guide to buy-ins

Pension scheme trustees have a duty to act in the best interests of scheme members. Traditionally, the most important aspect of this duty in practice is providing security of members’ benefits in the long term.

One way in which trustees can provide security for members’ benefits is via a bulk annuity policy or ‘buy-in’.

This quick guide explains what a buy-in actually is, and highlights factors which trustees and employers should take into account by when considering pursuing a buy-in project.

So, what is a buy-in?

When a pension scheme ‘buys in’, a premium is paid to an insurer for an annuity policy which covers some or all of the pension scheme’s members. In return for the premium paid, the trustees then receive a regular cashflow from the insurer which allows them to make the benefit payments due. The buy-in could be a full buy-in, which would cover all scheme members, or a partial buy-in, where only some of the members are insured such as those with a pension already in payment. There is also the potential for a phased buy-in which involves tranches of members being insured over time.

The trustees remain responsible for the running of the scheme and members should not notice a difference in their interactions with the scheme. Communications will still come from trustees, and any member queries should be directed to the scheme.

Why buy-in?

Once an insurance policy is purchased, the funding/investment and longevity risks, in respect of the scheme members covered, should be fully hedged. Members can take comfort in knowing their benefits are secured by an insurance policy.

Trustees can then focus on administration of the scheme, maintaining any discretions they hold and with the safety of knowing they should have access to the Financial Services Compensation Scheme if the insurer should fail.

Are there disadvantages?

Buy-ins can be a lengthy process. To calculate the premium that has to be paid, the trustees and the insurer need to be certain on exactly what benefits are being insured and how long they think the payments under the policy will be required. This can involve codifying discretions held by the trustees regarding matters such as benefit increases or amendments to specific scheme rules such as where there is a final salary link or hard to insure benefits. For more on insuring benefits, see our recent article here.

Tied to this process is the increased administrative burden and short-term cost. Advisers will be involved throughout the buy-in process to ensure that it is completed properly, in line with the policy’s requirements, scheme rules, and applicable law.

What happens next?

After a buy-in, the scheme can continue to run on or can look to move to a buy-out which involves all responsibility shifting to an insurer and the eventual winding-up of the scheme.

Set to come into force in Spring 2027, the changes regarding the flexible treatment of surplus in ongoing DB schemes, including the ability to return surplus to the employer, may also prove relevant here. The Pensions Regulator’s initial statement on new DB surplus flexibilities published in June 2026 does not preclude schemes which have bought in and have yet to take any decisions on moving to buy out, from the new flexible surplus regime applying.

If you have any questions about buy-ins, please contact a member of our Pensions team.

This article was co-authored by Trainee Erin Casey.

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