Copying and distributing are prohibited without permission of the publisher
Pension de-risking: insource or outsource?
14 February 2014
The conditions for pension buyouts are perfect, with high equity markets, strong corporate balance sheets and a willing reinsurance market. But should pension funds, asks Ceri Jones, manage derisking themselves?
2014 will be a massive year for bulk annuity and longevity swap
transactions, driven by both a steady increase in the number of
defined benefit (DB) pension schemes exploring these markets
and by a few mega deals.
Conventional buy-ins - where the assets stay on the pension
scheme's balance sheet and the trustees remain ultimately
responsible for the benefits - continue to dominate the market.
But more pension schemes are now considering a full buyout,
where the pension assets and liabilities are transferred to an
insurance company that takes over full responsibility for
making disbursements to pensioners.
This trend is partly a result of the rise in long-term interest
rates and equity markets, which have increased their
affordability, and because many companies have also reined in
their spending in the last few uncertain years and now have
plenty of cash on their balance sheets.
Once transacted, the insurer will usually lay...
Access to this content is denied because you are not logged in. Please login to view this content
Subscribers have unlimited access to all current and archive content. Start your
subscription today - click on the button below.
Taking a free trial will give you access to the current issue for two weeks (excluding
some surveys and articles). Start your free trial today.