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Four-fifths of DB pension trustees expected to approach insurer in next five years

With 36% expected to approach one within the next year


Four-fifths of Defined-Benefit (DB) pension scheme trustees are expected to approach an insurer in the next five years, Standard Life research has revealed.

The survey of 50 pension trustees managing DB schemes found that 50% anticipate their scheme will approach an insurer about a buy-in or buy-out in the next five years.

With 36% anticipating approaching an insurer within the next year.

Some 92% of trustees reported that the economic environment of the last year has improved their scheme funding level, with DB schemes benefitting from a rise in gilt yields, high inflation rates and slowing longevity improvements.

Additionally, 95% indicated that pricing was an important factor that determines whether they choose buy-in or buy-out as their ‘endgame’ strategy.

Managing director of defined benefit solutions and reinsurance at Standard Life Kunal Sood, said: “Bulk purchase annuity (BPA) deals have long been considered the gold standard when it comes to derisking, but sufficient funding is a key factor and for many pension schemes, a BPA deal was not in their short-term horizon, even just a year ago.

“However, driven in part by the increase in gilt yields and inflation rates, scheme funding levels have improved to the point where BPA deals are now a near-term solution for many DB schemes.”

“Trustees have many factors to consider when it comes to their derisking strategy; however, with many schemes in a strong funding position, it is unlikely that the current appetite for buy-ins and buy-out will slow down.”


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