UK - Over a third of UK companies are looking to buy-out some or all of the pension liabilities so insurers should raise more capital to meet demand, a study by PriceWaterhouseCoopers (PwC) suggests.
In a survey of "pension decision makers" at 86 UK organisations, PwC claims 35% of companies want to transfer pension liabilities to an insurer - up from 27% last year.
One in five of the companies considering the buyout route plan to do so in the next five years, compared to just one in 10 last year.
Marc Hommel, partner, PricewaterhouseCoopers LLP, predicts many of the existing buyout providers will need to raise further capital to write more business to meet growing demand.
The data suggests larger companies, with more than 5000 employees, are the most likely to take buyout action, as 43% of the 86 firm are considering buyout in the future, and 27% say they wish to achieve a buyout in the next five years.
In situations where the pension scheme liability exceeds the sponsoring organisation's value, three quarters (75%) of companies are considering a buyout.
"We're seeing increasing concern from companies about the volatility of their funding position and the associated impact on their balance sheet and profit and loss - this is particularly true of companies where the scheme liabilities are comparable to the value of the organisation," said Hommel.
According to PwC, news of recently-announced buyout transactions, together with growing opportunities to gain economically justifiable terms, is making pension buyouts a more "palatable" option for companies with DB schemes.
Hommel predicts, however, relatively attractive terms attached to buyouts will not continue for much longer, since it is not certain that investors will be satisfied with the returns available if the current pricing policies continue and they are then asked to provide more capital to achieve a buyout.
Other findings of the survey reveal 16% of participants have now closed their DB scheme to future accrual for existing employees, while another 11% expect to do so in the future.
PwC said this finding is significant as the number of schemes closing to existing employees has risen by some 13 percentage points in the last six months.
In addition, the closure of DB schemes to new employees continues to gather pace - with just 20% respondents' DB pension schemes open to new members, compared with 33% last year.
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