Preparing for a bulk insurance transaction is a rigorous process that requires pension schemes to undertake comprehensive member data preparation work, obtain legal sign-off for benefits to be insured and strategically assess de-risking strategies to ensure a seamless transaction.
On 9 April 2025, the Pensions Administration Standards Association (PASA) published new guidance on "data-readiness" for buy-ins and buy-outs, with the aim of helping pension schemes navigate data related challenges. The new PASA guidance builds upon the original 2023 guidance which covered the essential steps for trustees to take to achieve good governance in the lead up to buy-in and buy-out, as well as highlighting the fundamental data items that should be held for all members, and the consequences of holding incomplete, poor-quality data.
The Market Trends and the Importance of Data-Readiness
The bulk insurance market has seen an increase in recent years and is a well-established exit strategy for trustees of UK defined benefit pension schemes who are looking to transfer associated risks to an insurer and secure member benefits. The growing number of pension schemes now able to afford a full buy-in has given rise to an influx in demand for insurers’ engagement, which may prove difficult to accommodate due to capacity limitations, therefore the importance of data-readiness for schemes in preparation of a buy-in and buy-out is increasingly apparent. The goal of data-readiness is to ensure that scheme data is accurate, complete and stored electronically, to allow progression to a buy-in or buy-out. Without this, increased transaction costs and delays are likely to arise.
PASA's Updated Guidance: What You Need to Know
In summary, the new PASA guidance outlines actions to be involved in a data-cleanse plan and provides practical tips for implementation. The guidance also highlights points to consider when identifying and preparing necessary data, including data tables of fundamental data items that schemes are expected to store electronically.
The Key Actions for Data Cleansing
Insurers expect trustees to carry out data-cleansing actions between a buy-in and buy-out to ascertain true and accurate members entitlements. This exercise can be extensive, although a well-prepared scheme is in the best position to handle the process effectively.
The key actions for a data-cleanse plan to be successful are:
- Agreeing on project aims by collaborating with insurers to target key data items and deciding whether it would be appropriate for data cleanse work to be separated into smaller workstreams for delegation and prioritisation.
- Creating a data schedule or output file early in the process, including the data requirements and mapping data items from the administration system to the data schedule or output file with a data specification to allow insights into what each data field represents.
- Documenting how the production of the output file works to ensure consistency and conducting a full assessment to understand and document the structure and composition of the benefits to be insured and the key data required to complete this. This should be guided by a benefit specification signed off by the trustees' legal advisers.
- For trustees' professional advisers and administrators to openly discuss, and document areas of scheme data known to be incorrect, inconsistent or incomplete which require to be addressed by identifying issues that the trustees' administrators deal with everyday though in-depth questioning.
- Conducting a first principles-based data and benefit audit to validate data assumptions.
- Reviewing the results of the most recently calculated common and key scheme specific data scores for accuracy.
- Preparing for insurers to request all data items necessary for every possibility described in the benefit specification.
- Ensuring schemes are 'dashboards ready' as insurers are increasingly persistent about this due to transaction timings and fast approaching connection dates.
The Fundamental Data Items for Schemes
The new PASA guidance draws on insurer and industry feedback to set out what insurers will likely view as the fundamental data items for ensuring a seamless transaction. Whilst the data required for insurers to administer insured benefits differs significantly between schemes, PASA notes there is a commonality. Notably appendices to the new guidance note includes a table which lists the key data items relevant for all members, with each data item categorised by its level of importance.
Conclusion
In an active buy-in and buy-out market, it is clear that the ability to demonstrate complete and accurate data and benefits is crucial. It highlights schemes as attractive to insurers, encouraging them to invest resources ahead of other schemes and provide competitive quotes. In addition, transaction efficiencies are enhanced as complete membership data and benefit specifications typically prohibit unnecessary delays, allowing schemes to secure buy-in and buy-out opportunities as they come to light. Finally, accurate data provides for benefits to be correctly calculated and provides trustees the opportunity to fulfil their duties and discharge responsibility with peace of mind that members will receive the correct benefit entitlements from the insurer.
If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the pensions team or your usual Brodies contact.
