The road to buyout: Seven risk reduction consultants have their say

Ian Aley, head of transactions, Willis Towers Watson

Aley is the head of Willis Towers Watson's pensions transactions team and has advised on a number of landmark longevity and buy-in transactions.

 

Paul Kitson, partner, PwC

Kitson is the head of PwC's global pension longevity swap and buy-in network and has extensive experience of leading large de-risking projects.

 

Tiziana Perrella, head of buyout, JLT Employee Benefits

Perrella leads the buyout team at JLT Employee Benefits. Her primary area of expertise is advising on immediate de-risking activities such as synthetic, captive and traditional longevity transactions.

 

Martyn Phillips, partner, Mercer

Phillips is a partner in Mercer's UK bulk pensions insurance advisory group and has 25 years' industry experience and has been involved in all areas of the buy-in and buyout market.

 

Tom Seecharan, director and head of pensions insurance, KPMG

Seecharan leads KPMG's UK pensions insurance team and has 15 years' experience advising on, assessing and managing pensions risk, with a particular emphasis on pensions risk transfer.

 

Michael Walker, principal consultant, Aon Hewitt

Walker is a principal consultant and risk settlement adviser at Aon Hewitt and advises on the full range of risk settlement structures, with a particular focus on bulk annuities and longevity swaps.

 

Clive Wellsteed, partner and head of de-risking practice, LCP

Wellsteed heads LCP's de-risking practice. He is also a scheme actuary and provides corporate advice to a small number of clients.

 

How close are pension schemes to a buy-in or buyout at the current time?

Aley: Most schemes are now reserving for their pensioners at a level which is close to the buy-in cost. Typically, what's constraining them is the need to hold their gilts for collateral purposes and/or their funding deficit. As they continue along their de-risking journey, this will change and a pensioner buy-in will be the logical next step.

For non-pensioners, the gap between what the trustees are reserving and the insurer pricing is wider - as most schemes will have a largely return seeking asset strategy for non-pensioners. This gap will take longer to close without additional contributions, and so for most schemes a full buyout is some years away.

Kitson: PwC's recent pension risk survey showed that UK pension schemes have fallen into two distinct groups. The first group have quietly been de-risking over the last few years, biting the bullet of the costs associated with hedging interest rate and inflation risk. These funds now find themselves in a good place versus buy-in/out, having been protected from recent further falls in interest rates and at an opportune time are able to look to move to buy-in/out with acceptable cost.

However, there is a second equally substantial group that still have very low hedge ratios and, as interest rates have continued to fall, have found themselves a long way from buy-in/out and are having to continue to run substantial investment risk to reach a position where they can consider moving to buy-in/out.

As expected, there are a number of schemes in the second group that have weaker sponsors, whose de-risking ability has been constrained by the inability to increase cash into the scheme over the last five years.

Our view is that data preparation for buyout by schemes is better (but far from perfect) - but legal due diligence required for buyout is catching a lot of schemes out. You can gloss over this for a buy-in as you can base a buy-in on whatever benefits you want, but for a buyout you have to know exactly what all the benefits the scheme has promised over the years are and evidence this to the insurer. When schemes have come to do this they have often found a depressing smorgasbord of missing deeds, incomplete legal documents and historic changes that were not legally enacted.

All of this can be dealt with if you have time, but in the heat of executing a buyout the only way to solve these data and legal benefit entitlement issues is to pay a higher premium to insure higher benefits. The cost of this can be substantial.

Perrella: It is very hard to provide a general answer given the vastly different circumstances of UK pension schemes. A scheme with a significant proportion of pensioner members, funded 70% or more on a solvency basis, with some matching assets such as gilts and bonds will most likely be able to afford some form of bulk annuity purchase.

Trustees could opt to ‘top slice', or apply any other method of tranching, in order to secure benefits which are best value for money at any given time. It is disappointing that schemes are generally not well prepared to go to market - data quality can be hit and miss and schemes are still exposed to risks connected to their legal documentation not being complete or correct. This is work that does not go out of date, and should be undertaken by all schemes.

Phillips: Without scheme-specific insurer pricing, it is difficult to quantify how close schemes really are to a buy-in or buyout as the solvency liabilities of pension schemes, normally the best estimate of a buy-in or buyout that a scheme actuary can provide, can materially differ from actual insurer pricing, in some cases, by up to 10%.

The cost of a buy-in or buyout is normally assessed as the difference between the best insurer premium/proposal and the scheme's assets or technical provisions. Ultimately, with many schemes still under-funded on an on-going technical provisions basis, this means in many situations there will be a cost or strain to completing an insurance transaction. However, there are a large number of schemes that are funded on prudent bases and have successfully completed transactions with no additional funding being required from the scheme sponsor, and in some cases, at prices below the scheme's own technical provisions.

Cost can be a significant bar to some schemes but it really is a case of each scheme on its own merits - with some schemes already funding toward buy-in or buyout and/or with a sponsor with a strong balance sheet who might be willing to fund any shortfall.

Seecharan: Cost can be a bar to many. Insurance pricing is currently relatively high due to a tightening of credit spreads and high demand for swaps exacerbating the continued low yield environment. Solvency II is also likely to increase insurer costs for deferred members. Well-hedged schemes are faring well, however.

Many schemes are undertaking some form of work to get transaction ready. At one end of the spectrum this could involve cleaning data, undertaking feasibility studies etc. The best prepared schemes are those which have already begun talking with insurers. This group is in a position to transact very quickly to take advantage of favourable market conditions having already agreed preliminary pricing and terms with insurers.

Walker: Volatility in equity markets and low government bond yields mean that many schemes will not currently be in a position to execute a full buyout. However, partial buy-ins can be tailored to a scheme's current funding positon and investment objectives. Partial buy-ins for current pensioners remain good value relative to an investment in government bonds so cost should certainly not be a bar to schemes considering insurance based solutions.

A significant number of schemes need to take further steps to prepare for an insurance transaction. For example, only a quarter of schemes have an established criteria as to when they would transact, while only around half are confident that they have the data an insurer would need to complete a transaction. Conducting a de-risking feasibility study allows trustees and sponsors to clarify their de-risking objectives, understand the impact a transaction would have on their scheme and put in place a plan of action to facilitate a successful settlement.

Wellsteed: In short, many schemes could complete a competitively priced pensioner buy-in at the current time, but most are a few years away from buyout.

At our webinar earlier this year we asked the 100-strong audience how long they expected to take to reach buyout or self-sufficiency. Some 54% answered between five and 15 years, with 12% less than five years away. Over 80% said that they expect to do an initial transaction (ie a buy-in or longevity swap) ahead of reaching full funding with 50% expecting to do that initial transaction within the next five years.

Cost is not a barrier for pensioner buy-ins given current attractive pricing levels. Where the buy-in is met from gilts or other low-risk holdings there is typically a funding gain reflecting buy-in pricing is currently slightly better than a gilts valuation.

Cost is a hurdle for full buyouts as most pension plans continue to have a significant shortfall in assets compared to the full buyout cost. However, there is increasing corporate appetite to meet the cost particularly where it helps facilitate corporate activity. Last year Philips paid a significant cash injection into its UK pension fund to achieve a full buyout ahead of its demerger earlier this year.

To what extent is there significant pent-up demand among schemes waiting for costs to fall?

Aley: There is certainly pent-up demand. If pricing in the buy-in market improves relative to scheme assets, it is likely that more and more schemes would consider moving to annuitisation. From an asset perspective, improvements in funding levels driven by rises in equity markets would also lead to more schemes taking action.

A significant number of the schemes we advise are currently monitoring both their funding level and buy-in pricing on a daily basis so they are able to quickly identify pricing opportunities.

Kitson: Our pension risk survey suggests that if interest rates increase by 1-2% across all durations then you could see transactions worth tens of billions of pounds coming to the buy-in/out market relatively quickly.

Many schemes are working towards a long term target of buyout or self-sufficiency where buyout is likely as they reach full funding on this basis.

Perrella: The majority of UK defined benefit schemes will discharge their liabilities via a buyout, or a series of buyouts, at some point - the alternative is to run the scheme until the last pensioner dies, which would not make financial sense. This, and the sheer size of the DB sector, against the insurance sector's appetite for longevity risk, suggests a huge amount of pent-up demand, and we expect supply-side issues to become manifest over the next few years. These are already becoming evident for smaller schemes.

Some trustees and sponsors have delayed approaching the market in the expectation that prices will fall when yields pick up. However, as the expectation of yields increasing in future is already reflected in asset and annuity prices, this would not necessarily improve affordability. There is also the issue that if a large number of schemes rush to market at the same time, not all of them will be able to get quotes. Therefore, settling a scheme's liabilities now for a low, but known, yield looks like a sensible course of action.

Phillips: There is no doubt in my mind that latent demand for buy-ins and buyouts is vast. There are probably only a small number of schemes who wouldn't complete a buy-in or buyout if they had the financial resources to do so. However, adopting a strategy of waiting for insurance premiums to fall needs careful consideration. If insurance premiums do fall, say, as a result of increasing yields, then, firstly, it is likely that scheme assets/liabilities will have also fallen in value and, secondly, many other schemes may also be in a similar position and thus competing for what might be limited insurer capacity.

As a general point, demand is also set to increase as the natural passage of time makes it easier and cheaper to externalise liabilities via insurance as pension obligations become more certain as overall liability durations become shorter.

Seecharan: As more schemes sign up to more sophisticated price discovery and real-time tracking approaches, we expect pent-up demand to increase. In recent years, a growing share of market activity is in respect of pension schemes going back to the market to insure additional tranches of their liabilities. Those who have traded before represent a far more straightforward and attractive prospect for insurers to trade with and will often be at the front of the queue when conditions improve.

Indeed, with around £350bn of pension scheme liabilities relating to schemes with buyout funding levels at 75% or over, insurance activity will be driven by this population in the short term and this could take up a large proportion of the capacity in the market.

Walker: Demand is likely to outstrip short-term capacity should there be a significant improvement in affordability. There are around £2trn of UK DB pension liabilities of which approximately £60bn have been insured to date. Even allowing for those schemes that do not have a buyout objective, with only around £15bn of bulk annuity contracts currently written each year, it is clear that there could easily be many more schemes wishing to transact than capacity exists for in the current insurance market.

Schemes need to ensure that they are at the front of the queue when a buy-in or buyout become affordable for them and take actions now to ensure they are fully prepared to take advantage of opportunities in this area.

Wellsteed: There is significant pent-up demand which is likely to be released should funding levels improve.

We estimate that only one in 10 FTSE100 companies with UK pension schemes are over 80% funded on full buyout. This would double to one in five FTSE100 companies if there was a 15% rise in equities and similar assets. It would more than triple to one in three FTSE100 companies with a 30% rise. Rising interest rates would have a similar effect.

These dynamics show how the market could change very quickly. Despite insurer capacity being at record levels, demand could quickly outpace it, putting upward pressure on pricing.

What are the risk reduction exercises schemes can conduct ahead of an insurance-based solution? What sort of exercises are being conducted currently?

Aley: For pensions currently in payment, there are two main options. Firstly, those members with small pensions, where the fixed costs of insuring them are significant, could be offered a lump sum. Secondly, members could be offered the option to exchange their non-statutory pension increases for a higher level pension. This can be particularly useful in reducing the buy-in cost where the pension increases are unusual and therefore difficult for the insurer to hedge - for example pension increases with an annual floor of 3%.

For non-pensioners, we are currently working with a large number of schemes who wish to offer members more flexibility at retirement. Recognising that an increasing pension with a spouse's pension attached no longer necessarily meets members' needs, both trustees and companies are facilitating members transferring their benefits at retirement. This gives the members flexibility to access their pension in a more flexible defined contribution environment, and typically leads to savings relative to the buy-in cost.

Kitson: Most of the focus is currently on pension increase exchange (PIE) and flexible retirement option (FRO) exercises.

PIE is where you offer the member who has a pension of say £10,000 per annum which increases with RPI, a pension of £12,000 per annum which does not increase. This can be beneficial for buy-in/out as insurers need to load in risk margins for inflation-linked pensions due to the additional risk factor.

FRO is where you offer members over age 55 but who have not yet retired the opportunity to transfer their pension to income drawdown or to buy an immediate enhanced annuity. This can be beneficial for individuals. Once a member has started drawing his pension in a DB scheme he loses the ability to transfer to drawdown or buy an enhanced annuity, hence you run the exercise for those not yet retired. FRO helps buyout costs as members are potentially leaving at a lower cost than it would cost to buyout their DB pension.

Both exercises fall under the FCA Code of Good Practice and are likely to require financial advice to the individual.

We have seen take-up rates anywhere between 5% and 50% for these exercises, which is quite diverse.

Finally, conducting a medically underwritten buy-in/out of the largest liabilities in the scheme can be a good way of cheapening the overall buyout cost. There used to be a concern that if you got a good price on the medically underwritten large liabilities you may make what was left of the scheme less attractive to buyout providers, but I think this has changed now. However, you do still run the risk though that you discover all your large liabilities are super-healthy and once you have discovered this you cannot forget it, as it would be disclosable to all buyout providers and so could therefore increase the cost. However across all schemes overall on average we would expect it to decrease the cost.

Perrella: Liability reduction exercises can be run as follows:

• Enhanced transfer values (ETVs) - allow deferred members to transfer an uplifted value of their benefits to an alternative arrangement.
• FROs - allow deferred members aged 55 and over to retire early, or to take a transfer value and secure benefits in a different format from their scheme benefits, or to use funds for draw down purposes.
• PIE exercises - allow pensioners to exchange non-statutory increases for a higher immediate pension with lower future increases.
• Trivial commutations (TCs) - allow members with low value benefits to cash these in.

The most common exercises at the current time are PIEs and TCs - these can easily be carried out at the same time as a bulk purchase annuity broking exercise and, indeed, the trigger for a bulk annuity purchase can be agreed to fit in with the expected outcome of one or more of these exercises.

A bulk annuity purchase can also follow investment side de-risking, essentially swapping matching assets such as gilts and bonds for a complete liability hedge, also covering longevity risk.

Phillips: We are seeing an increasing number of schemes considering liability management exercises: PIEs, ETVs, FROs TCs and, for those contemplating buyout, Winding Up Lump Sums (WULS). It is now possible - with the support of pension scheme trustees - to re-engineer the finances of pension schemes of all sizes to support the outcome the sponsoring employer is seeking.

We see opportunities for creating value via a coordinated and combined approach that allows members to exercise options, supported with high-quality personalised financial advice, against a background of annuitisation. This kind of joined-up approach delivers improved value for individual members and can enable economic settlement of pension liabilities for those remaining in the scheme at a cost well below initial expectations.

Seecharan: A PIE can convert inefficient and costly pension increases into level or fixed increases which insurers are better able to price attractively. For schemes looking to buyout, running a transfer value exercise may also prove a popular option with members as the transfer value basis could worsen for members following an insurance transaction.

On the asset side, one important form of de-risking is to hedge interest rates. For many years now, the majority of liabilities have remained unhedged against this unrewarded risk, waiting for conditions to improve. The problem is that, contrary to all market expectations, yields have continued to fall, meaning schemes that chose to hedge, thereby locking-in the market's more optimistic expectation, have benefited and it is largely those schemes who are currently insuring their liabilities.

Walker: There are two main avenues schemes can explore to reduce risk ahead of a transaction.

The first is to reduce liabilities from the scheme which would be expensive to insure such as deferred pensions. This can be achieved through offering options to members. Running an exercise to highlight the option to take a transfer value can generate significant take-up rates with substantial savings relative to insurance pricing as well as reducing the overall risk within the scheme.

Secondly, schemes can consider reshaping benefits to make them more attractive to an insurer. Pension increases linked to CPI or with certain caps and collars can be comparatively expensive to insure. Schemes can run a PIE exercise to allow current pensioners the option to exchange their current inflation linked pension for a higher fixed pension. This removes uncertainty in the level of future pensions payable by insurers leading to material price savings. In addition, schemes can offer this as an ongoing option to deferred members at retirement similarly preparing the scheme for a more cost-effective insurance solution coupled with providing increased flexibility for members.

Wellsteed: There are four common exercises which can help to reduce risk ahead or as part of a full buyout. These are PIEs, ETVs, FROs and trivial commutation exercises. In our experience average take-up of these can be 10-30% and tend to be initiated by the company particularly if they will be paying a cash injection into the scheme.

These exercises can provide members with greater flexibility in the form in which they take their pension whilst allowing the pension scheme to settle their obligations at a lower cost than buyout.

At the point of buyout a much higher limit applies on trivial commutation meaning that schemes can sometimes offer a significant proportion of their members a cash lump sum rather than an annuity.

What can pension schemes do right now to ensure they are ready to transact when affordability becomes less of an issue?

Aley: If a buy-in or buyout are within a scheme's short- to medium-term plan, I would recommend they consider the following steps:

• Prepare their data. Data items that are not needed for day-to-day administration are more important for a bulk annuity - such as spouses' pension amounts. For larger schemes, ensuring mortality experience data is good quality and information rich can significantly help pricing.
• Gather spouses' information. Understanding the proportion of your members that are married, and the age of their spouses, is valuable information in order to enable insurers reduce prudence within their assumptions.
• Prepare a benefit specification. In my view, this is always a good investment for a scheme, whether a buy-in is on the horizon or not, as it ensures the scheme is being run correctly.
• Ensure all investment decisions recognise the possibility of a future transaction. This includes thinking about both the liquidity of asset classes, entrance and exit costs and whether an insurer would find them attractive to in-specie transfer.

In addition to these practical steps, agreeing the governance framework for any transaction - for example agreement of objectives with the sponsor - will ensure schemes can act quickly if market opportunities arise.

Kitson: Data due diligence appropriate to a buy-in/out - and not just a ‘business as usual' data audit - is one step.
Another is conducting a review of the historic legal documents of the scheme, and not just the latest trust deed and rules as the older documents are still likely to apply for most of the deferred and pensioner population.

Perrella: In advance of approaching the market, trustees should:

• Check their scheme rules to confirm that the scheme has been administered correctly - it is disappointing how many schemes still discover problems with their equalisation approach.
• Cleanse their data, including verification of members' benefits, calculation of spouses' pensions, and carrying out existence checks.
• Obtain any preliminary advice or training on bulk annuities which may be required - this could include preliminary due diligence considerations in respect of the various insurers.
• Consider a suitable trigger for a transaction, taking into account their investment strategy and funding plans, and involving the sponsor if sponsor support is likely to be needed.
• Consider whether any liability de-risking exercises should be carried out, and whether these are best undertaken before or at the same time as a bulk annuity purchase.

Phillips: If and when affordability becomes less of an issue for more pension schemes, we could be faced with a situation where demand for pensions insurance outstrips supply. Given the market has historically completed only 150-200 deals in any one year - representing only a very small proportion of the c.6,000 private sector DB schemes - there is a real risk of capacity constraints in the market, not just from an insurer capital perspective, but also from a resource and expertise perspective.

We saw this happen in 2008 and lots of schemes experienced a situation where they were unable to attract a sufficient amount of insurer interest and unable to transact in their desired timescales - resulting in many missing the boat.

We believe schemes should be creating a level of engagement with insurers well in advance of a transaction and ensuring that their scheme data is in good order to help facilitate a transaction in due course.

Seecharan: There is nothing stopping a pension scheme going to market now and getting quotes from insurers. This underpins the accelerated buy-in approach we introduced in 2013 and which has been delivering great outcomes as it gets the harder, more time consuming tasks out of the way in advance, meaning that these pension schemes are at the head of the queue should financial conditions improve. Put together with the ability to track pricing and market conditions in real-time, using tools such as KPMG Fusion, this gives pension schemes the ability to transact within days, take advantage of a volatile market and achieve significant savings (3% to 10%) against expected pricing.

Insurers also favour this approach, as it allows them to quickly match their order books with pension schemes, particularly where they are aware of the price a pension scheme would need in order to transact.

Walker: Schemes can perform high level feasibility studies and conduct training for trustees and the sponsor so that future insurance decisions can be made with a comprehensive understanding of all the options available in the market. A typical feasibility study would look at the impact of a transaction on the scheme's technical provisions, recovery plans, accounting position and investment strategy.

Another key step is ensuring the scheme has clean data and a clearly specified benefit structure. Insurers price transactions based on the information provided and uncertainty leads to caution and higher prices.

The risk settlement market is busy and insurers already reject unattractive opportunities. Schemes need to demonstrate commitment from both the sponsor and the trustees to completing a transaction as well as affordability and adequate preparation.

Wellsteed: Our advice is always to be ready to move quickly to seize opportunities. Insurers offer the best opportunities to those schemes that are well prepared with good data and good governance.

Data does not need to be perfect but must be sufficient for the insurer to optimise their pricing such as marital status and mortality experience.

Good governance will allow trustees and sponsors to make the complex decisions required in the timescales necessary. Real-time pricing tools, such as LCP Visualise online price tracker, can provide valuation information to help decide when to engage with the market. The price tracker displays a range of pensioner buy-in prices tailored to the scheme using live pricing yield curves from the insurers.

What innovations are currently being introduced into the market to help schemes reduce risk?

Aley: The ways that schemes are measuring longevity risk is an area of innovation. We've used stochastic techniques to help schemes understand the potential financial impact of longevity for many years and have recently launched PulseModel to enhance this. PulseModel uses medical science and the views of medical experts to improve predictiveness - incorporating the impact of medical conditions, such as diabetes, to inform future mortality patterns and the associated risks.

The way in which schemes are monitoring buy-in and buyout pricing has also seen recent innovation, with tracking tools such as our Asset Liability Suite closely linked to insurer pricing to ensure that schemes understand the cost of transactions on a daily basis.

Finally, innovation has made buy-ins well-managed, quick and cost-effective for small schemes. Our streamlined bulk annuity service uses pre agreed legal contracts to give access to terms which have generally not been available to smaller transactions.

Kitson: Volatility controlled equities can be a good way of managing risk associated with equities.

In addition, data visualisation tools, such as PwC Trade Ready, can be used to assess data risk even for very large schemes using new computer packages.

As well as this, longevity swap structures, such as PwC's Iccaria, which you can transfer to your buy-in/out provider means that longevity hedging is not a barrier to buying-in/out later, enabling schemes to reduce life expectancy increase risk on the journey to buy-in/out.

Cloud based valuation and risk systems such as Skyval Insure are allowing buy-in/out pricing to be obtained from the whole insurer market in days not weeks now.

Perrella: The most recent innovation from insurers is around payment terms, to deal with cases where affordability, rather than cost in absolute terms, is the key problem. Contract structures allowing for premiums to be paid over an extended period of time are not particularly new, however they have had to be redesigned in some cases to make them Solvency II friendly.

In general, trustees accept that de-risking their pension scheme will most likely be a gradual process, with successive tranches being settled at various times. We believe that setting formal buy-in triggers will become increasingly common as part of a pension scheme's overall investment strategy. This would work particularly well within a fiduciary setup, as investment managers, acting on behalf of the trustees, will be able to transact quickly and efficiently when circumstances allow.

Phillips: We continue to see more and more risk reduction strategies for schemes, ranging from innovations on the investment side, to new and refined solutions on the liabilities side, such as the utilisation of captive structures, medical underwriting/top-slicing deals and longevity swaps being made available to much smaller schemes. We are also seeing an increase in technology-led solutions to help better position schemes with insurers.

Seecharan: The insurance market has seen significant innovation recently with insurers willing to specialise by size or type of transaction to gain or maintain market share. Recent innovations include technology-driven price tracking, top-slicing (insuring the largest liabilities to access better pricing and better value for money in terms of risk control), medically underwritten transactions and member option driven transactions.

KPMG's latest innovation is Group Insure, which allows smaller pension schemes to access the favourable pricing and competitive tension enjoyed by the largest insurance transactions and also save significant amounts on advisory and implementation fees. Alongside these new approaches, previous innovations, such as Accelerated Buy-In continue to deliver significant savings and risk reduction.

Walker: The risk settlement sector is incredibly fast moving. In recent years we've seen the creation of medically underwritten bulk annuities - a market that grew from a standing start in 2013 to over £1bn of transactions in 2015.

In 2016 and beyond we see some of the innovations created for larger pension schemes flowing through to smaller transactions. For example all-risks policies, where insurers take on broader risks such as missing beneficiary cover, are now available for some £50m transactions.

Increasingly we also see the combining of liability management techniques with risk settlement. Reshaping or reducing a pension scheme's liabilities in advance of insurance can lead to significant price improvements.

Wellsteed: We have developed LCP LifeAnalytics providing schemes with technology to measure longevity risk and identify when and how to transfer longevity risk compared to other de-risking opportunities.

LifeAnalytics models longevity risk at an individual member level allowing schemes to measure longevity risk robustly and reflecting their own scheme's membership. We have integrated LifeAnalytics into LCP Visualise, our online real-time valuation system, to help schemes analyse whether reducing investment risk, longevity risk or both offers the most risk reduction for a given spend. It can also help answer questions such as whether a concentration of risk in larger pensioners justifies a top-sliced buy-in at current market pricing and so on.