The value of the pension buy-out market could more than double in 2018, a director of an employee benefits provider believes.
JLT Employee Benefits’ Charles Cowling forecasts that there could be £30bn worth of de-risking deals this year, eclipsing the £12bn recorded in 2017.
Favourable pricing and the drive by a growing number of defined benefit (DB) schemes to offload all of their liabilities are fuelling Cowling’s forecasts.
Longevity growth slowing and shrinking deficits in the past year are other catalysts.
Indeed, the funding position of all UK private sector DB schemes improved to 92% at the end of 2017, on an IAS 19 measure, up from 89% 12 months earlier.
During this period the collective deficit fell by £37bn to £150bn.
The improvement among FTSE 350 companies was smaller at £16bn, but forced funding levels to 94% from 92%.
“As IAS 19 deficits are falling, so too are buy-out deficits,” Cowling said. “At JLT we are seeing strong evidence that the pension buy-out market is showing signs of taking off – as competition between insurers is hotting up and prices are getting keener.
“It will still be many years yet before UK plc can afford to settle all of its DB pension liabilities, but we are now clearly on the path to full and final settlement,” he added.
