Pensions - Articles - Cost of pension buyouts set to rise by 10%, according to PwC

 Solvency II will require insurers to hold more capital to support buyout business written from January 2016. PwC predicts this could drive a surge of activity in the buyout market in the coming weeks, as pension schemes rush to complete deals this year before the price hikes. 

  

 Around £13bn worth of DB pension liabilities were passed to insurance companies in 2014 and a further £5bn to date in 2015, as companies seek to remove these unpredictable and long-term liabilities from their balance sheets.

  

 The expected price hike will affect pension schemes with pre-retirement members (so called full buyouts), the most. Deals which only involve members that have already retired are less affected by the new Solvency II regime, where pricing has benefited from more insurers now operating in this market.

  

 Jerome Melcer, PwC pensions director and buyout adviser, said:

 “Any companies considering a pensions buyout in the next few years should buy now or could end up paying later, due to the price hikes Solvency II will bring.

  

 “Companies or trustees looking at the business case for buyout will need early, reliable price visibility before pressing the button on buyout. This is where real-time information, such as PwC’s unique Skyval Insure service, can add real value, by sourcing direct pricing from all of the insurers operating in the buyout market within a week of a request. Pension trustee boards and financial directors will find this refreshingly cost efficient compared to traditional processes which otherwise take months.”