Advisers should consider medically underwriting the de-risking of smaller defined benefit schemes to be confident they have given their client best value says enhanced annuity specialist insurer Just Retirement.
The provider, which launched a defined benefits proposition offering de-risking solutions to employers and trustees of smaller schemes last month, says ignoring the medical conditions of members with the biggest benefits means trustees of some schemes could be paying over the odds if they buy out the benefits of pensions in payments.
The provider has created a new 10-strong team with buy-in/buy-out expertise to help EBCs working with trustees and employers of schemes with up to 300 pensioner members. De-risking of pre-retirement members is not being targeted.
Its process involves medically underwriting by telephone interview members of the scheme with high levels of benefits. Medical underwriting is already commonplace in the individual annuity market where it accounts for more than a half of open market option annuity purchases. Modest-sized schemes make up the majority of the 6,400 schemes tracked by the Pension Protection Fund with the average buy-in/buy-out deal valued at around £20 million.
Just Retirement head of external affairs Steve Lowe says: “If you are providing advice to trustees or employers you can’t just put one offer on the table – you have got to show them the full range of options. Otherwise you will be giving poor advice and your client will be missing out on potentially better value deals, in the same way that pension customers who default back to their life insurer’s annuity have been missing out.”