UK - Over 60% of UK pension schemes are preparing to offload their pension scheme from the corporate balance sheet via a buyout, claims Watson Wyatt.

During a pension fund seminar, held at the end of March, double the number of UK pension funds said to be preparing for buyout within the next 10 years than were a year ago, argued the consultant.

"Some 62% of delegates said they were preparing to buy out their pension liabilities with an insurer during the next 10 years, up from the 31% who said they were doing so at a similar Watson Wyatt seminar a year ago," says Watson Wyatt.

Other findings of the seminar, which around 100 senior representatives of companies with defined benefit pension schemes attended, included evidence suggesting nearly half of schemes say the maximum amount they would pay an insurer to take pension liabilities off their hands was between 110% and 120% of the IAS19 liabilities.

"With a competitive marketplace having reduced the premium for buying out liabilities, it is thought that some recent deals have been transacted at between 115% and 120%," said Watson Wyatt.

Moreover, three quarters of delegates said either the possibility of buying out liabilities had been discussed at a board meeting (45%) or that they expected this to happen within the next 12 months (29%).

The route to settling pension liabilities has been rising up the corporate agenda, also as last week one of Scotland's oldest Scotch whisky distilleries, Morrison Bowmore Distillers agreed terms with Paternoster for a £30m (€38m) phased buyout of its pension scheme. (See earlier story on ‘Whisky and mushroom firms plant buyout future')

Morrison Bowmore, which is part of the Japanese Suntory Group, said the deal means scheme members immediately benefit from the security of an insurance policy, while the company is able to manage business costs more efficiently by arranging to pay off the deficit over an extended period.

Meanwhile, Blue Prince Mushrooms said it had used an e-auction to buyout its £6.5m pension scheme with Legal & General, after the scheme started to wind-up once its sponsoring employer ceased trading.

Lane Clark & Peacock (LCP), the actuarial and pension consultancy which oversaw the e-auction, claimed the trustees of the scheme decided to adopt a buyout approach as they wanted to "ensure that all members' benefits could be secured in full with an insurer and to minimise the company top-up required".

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