19 April 2007
Only 10% of companies expect to remove their pension scheme
liabilities within three years, despite the recent emergence of
providers dedicated to buying out scheme liabilities, according to
research released by Aon Consulting.
Several pensions commentators have predicted a surge in buyouts,
but the research by Aon reveals that the reality is the market is
likely to be a slower burner than expected. Amongst those schemes
that are considering it, the average time to buyout is likely to be
more than 12 years. Two fifths (40%) expect to remove scheme
liabilities over a period longer than 10 years. Many larger schemes
could take even longer, with almost 20% expecting to take more than
20 years.
The research showed that approximately two thirds (68%) of
schemes are simply not interested in buyout at the present time. Of
those that are, only 10% would be prepared to pay more than 120% of
the liabilities calculated under FRS17 (i.e. the UK pension
accounting standard). However, the typical cost of buyout is around
130% of the liabilities under FRS17, although this varies from
scheme to scheme.
