UK DB Schemes Targeting Buyout Treble in Past Five Years
The number of defined benefit (DB) pension scheme trustees targeting a buyout with an insurer has increased significantly in the past five years, according to new research from
"Over time, increased demand for securing liabilities will require an increase in supply. Perhaps the biggest question mark concerns the availability of long-term assets carrying an illiquidity premium. Typically, these account for 30% to 40% of the investments a buy-in provider makes to back the pension commitments it takes on. If supply does not keep pace with demand, prices could worsen slightly. To get the best prices, schemes may have to be flexible as to when they transact, being at the front of the queue when a chosen insurer can source appropriate assets."
Long term journey planning is the most commonly cited priority both for trustees and scheme sponsors - 63% of trustees and 68% of pension managers list it amongst the three most important issues for them over the next three years.
The number of schemes with long-term journey plans, which document these ultimate goals, has remained steady in the past five years, at around two-thirds. For the remaining third of schemes, 22% are in the process of developing a plan, a significant increase on the 6% who said the same five years ago, as schemes mature and are closed to new benefit accrual.
The Government stated that one of the key changes to result from its
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