Irish Life ends first sale of sovereign annuities
Irish Life Corporate Business has completed the sale of its first sovereign annuity product.
The sale was part of a package of sovereign and conventional annuities in the region of €20 million sold to a defined-benefit pension scheme.
A spokesman for Irish Life declined to identify which firm operated the scheme.
The scheme will use the investments to enhance the funds available for active members who are being transferred to a defined-contribution scheme.
Sovereign annuities are linked to long-dated bonds issued by the National Treasury Management Agency.
They offer higher yields than are available from the German and French bonds which traditionally underpin annuity products.
Vincent Boyle of Allied Pension Trustees said: “Although the yields available on Irish government bonds have fallen dramatically in the last few months, there are still significant savings on sovereign annuities against traditional annuity products. The NTMA is targeting to raise over €3 billion in the next couple of years from Irish pension schemes investing in sovereign bonds and sovereign annuities.”
Such annuities are certified by the Pensions Board and available to trustees of defined-benefit schemes. They are cheaper than traditional annuities because they invest in specialist long-dated bonds issued by the NTMA.
Insurers can pass on these higher returns but also have the right to reduce annuity amounts if payments are not received on the bonds.