This year looks set to be a record year for pension scheme buy-ins, buy-outs and longevity swaps, according to research conducted by Hymans Robertson.
The Managing Pension Scheme Risk Report Q3 2011 found that the third quarter of 2011 saw over £2 billion of risk transfer deals completed, comprising buy-ins, buy-outs and longevity swaps.
The £1.1 billion Turner and Newall buy-in with Legal and General, announced at the end of October 2011, was the largest of its kind to date.
In August 2011, ITV became the 11th FTSE 100 company to complete a material risk transfer deal with its pension scheme, when it completed a £1.7 billion longevity swap deal with Credit Suisse.
This was the third-largest pension scheme risk transfer deal and the largest since BMW’s £3 billion longevity swap in February 2010.
Since the longevity swap market took off in the summer of 2009, nine longevity swap deals have covered £9 billion of UK pension scheme liabilities.
FTSE 100 companies alone have now transferred the risks associated with over £8 billion of pension scheme liabilities to insurance organisations and banks.
James Mullins, a partner and head of buy-out solutions, at Hymans Robertson, said: “Pension schemes are increasingly viewing buy-in deals simply as an investment strategy decision, and one that looks particularly attractive in the current market.
“Many pension schemes are reviewing their government gilt holdings, which provide quite a good match for pensioner liabilities, given the option to exchange some of their government gilts for a buy-in policy, which provides a near perfect match for pensioner liabilities, and at a potentially lower cost.
“This pricing dynamic is one of the few positives for UK pension schemes following the market turmoil since the summer of 2011.”
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