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Buy-out business jumps by half, says ABI

Buy-out firms reported a 50 per cent increase of funds under management to £22bn at the end of 2008, according to new figures from the Association of British Insurers.

The ABI says the pensions of over half a million people are now covered by these funds.

As such, it has produced a guide for trustees and companies explaining how bulk insured pensions work. The document is available on the trade body’s website.

Director of financial regulation Peter Vipond says: “Trustees and corporate sponsors have never faced such a challenging environment. Recent comments from the Pensions Regulator, that companies must fund pension deficits before paying dividends, reflect fears over the sustainability of final salary pension arrangements. The ABI’s guide will help trustees understand the range of insured options available.

“While bulk insured pensions currently make up only a small proportion of total pension funds, there is increasing interest in the opportunities they provide. This is good news for those with defined benefit pensions, as there would be no change in the pension promise. The obligation to pay their DB pension promises simply moves from the corporate sponsor to an insurer.”

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