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Pension funds gain access to deficit insurance

UK - A company is set to launch in the UK which allows defined benefit pension schemes the ability to buy a form of insurance to cover their pension deficits.

Specific details have yet to be revealed on how insurance products will work or what they will cost to a pension scheme, but the product allows a pension fund to guarantee an agreed level of its liabilities over 10 years, in a bid to limit the volatility of liabilities under international accounting rules when markets are turbulent.

In order to secure the insurance, the pension fund essentially decides how much of its liabilities it wants to cover, a similar amount of money is then placed in a policy managed by the new entity known as Tactica Insurance, and at the end of the 10 years assets matching the original liability are returned to the pension fund.

Regulatory approval for the new insurance proposition is expected to be authorised by the Financial Services Commission in Gibraltar within the next two weeks.

The firm will begin its capital raising process once the firm has gained approval, said Wai Au, previously head of global servicing at banking group Barclays, and now a key figure at the company being launched by financier Stefan Allesch-Taylor and former Bank of Scotland chief executive Sir Peter Burt.

Tactica is believed to be partnering with Jardine Lloyd Thompson to build the products while the Pension Capital Strategies Group will distribute the new insurance offering.

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