When a scheme is closed to new members, as the C-Plan has been since 1997, there will inevitably come a time when the last beneficiary dies.  Before that, there will be a time when there are just a few members and it makes financial sense for the company to outsource the pension scheme - that is, to pay somebody to take responsibility for paying the few remaining pensions.  This is called a "buy-out" if the whole scheme is offloaded, a "buy-in" if only partial.  (For example, a scheme with both actives and pensioners might buy annuities that cover all the pensioners so that the sponsor had no financial risk associated with those pensioners.)

The question that has been exercising many sponsors is how far this can be taken back.  Will it be good business to offload the pension scheme earlier?  This will avoid the risk of needing to make unexpected contributions and will remove the fluctuations of pension funding from the company accounts.

The concern for scheme members is in how certain the delivery of their pensions will be when in the hands of another organisation.  There are concerns particularly when the scheme is offloaded to Private Equity.   On the other hand, if the organisation that takes over is a large insurance company. like Norwich Union, the delivery could well be more certain than it was when the company was responsible.

A critical consideration is whether the organisation is regulated by the Financial Services Authority.  There has been just one buy-out company that was not regulated by the FSA.  After this happened the powers of the Regulator were increased and the unregulated buy-out is no longer regarded as a good business model.   It is likely that all future buy-outs will put the pensions delivery with FSA-regulated organisations.  (The powers of the Regulator are likely to be increased also to combat a situation the Pensions Minister describes as "Some new alternatives to pension buyouts have emerged that can put members’ benefits and the Pension Protection Fund at risk.")

For some years AMIPP has told you there was negligible chance of IBM UK going the buy-out route because (a) it is an expensive option compared with run-it-yourself and (b) our fund was too big for the market (the organisations taking responsibility) to handle.  This remains true now but it can be noted that the trend is to a larger buy-out market capability.  Cable and Wireless recently spent £1 billion on a buy-in covering its pensioners.  Total IBM UK Pension Trust liabilities are at the £5 billion level, but the Actuarial Report does not split that between employees and others.