© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
The traditional policy offered by large UK insurers. Pension schemes pay a premium and in exchange the insurer writes an annuity that pays the retirement income of a large chunk of a scheme’s pensioners who have already retired.
Trustees offload all investment, inflation and longevity risks associated with paying income to a group of retirees. Insurer gains chunk of assets and a premium.