Assured Payment Policy (APP)

APP feature
An insurance policy that provides the pension scheme with protection against investment-related risk.


APPs at a glance

  • Provide a pre-agreed series of future payments, which may be fixed or inflation-linked.
  • Similar in nature to a buy-in, with the crucial difference being that APPs do not vary with longevity risk or other demographic experience. This means that we might typically see a price difference to bulk annuities of up to 10%.
  • Held as a pension scheme asset.
  • Can apply to any sub-set of a pension scheme’s liabilities.
  • Can be used in combination with other de-risking solutions, such as pensioner buy-ins.

What do they do? 

APPs can best be thought of as:

  • Partial insurance: an APP locks down investment risk now, with a clear structure for adding the remaining pension-related risks in the future to “complete the bulk annuity”; or
  • An investment: an APP allows a pension scheme to “build its own bond”, with tailored inflation coverage and no exposure to market and reinvestment risk, while achieving a yield in excess of gilts.   

How do they work? 

  • An APP’s fixed or inflation-linked pre-agreed payments are designed to match all or some of a pension scheme’s liabilities.
  • The trustees pay an upfront premium, as per a bulk annuity. In exchange, a payment schedule is agreed at outset, and payments are made by us to the trustees of the pension scheme as per that schedule.
  • APPs can be structured to allow for conversion to buy-in or buyout, including through a series of partial conversions over time. This flexibility, and the effective and transparent conversion mechanics, create a more certain de-risking journey.