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Aegon plans to target SMEs in bulk annuities market

Aegon is entering the bulk annuities market and will target closed defined-benefit pension schemes in smalland medium-sized companies by spreading the cost of buyout over a number of years.

The life office says it is the first to offer a phased-fund approach for smaller schemes in the bulk annuities arena, enabling employers to gradually reduce the risk of scheme liabilities and company balance-sheet volatility.

Aegon Trustee Solutions will let SME scheme trustees combine traditional pension scheme investments with deferred annuities in the scheme funding plan.

Figures from the Association of Consulting Actuaries 2005 survey show that 74 per cent of defined-benefit pension schemes with less than 250 members are now closed to new entrants.

Aegon says it will offer its standard deferred annuities through a controlled distribution strategy initially but plans to develop this wider at the end of the year.

The market for bulk annuities and closed books of business is becoming one of the most competitive areas in the industry. Last week, Prudential UK chief executive Nick Prettejohn said the number of new entrants and increased competition are driving down insurers’ margins.

Aegon UK chief financial officer Mark Laidlaw says: “We believe we are the first player in the bulk annuity market to offer a specialist solution for the SME market that has the potential to cost them less and allow a controlled wind down of the pension scheme.”

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