For some schemes, their buyout positions have improved as a result of rising Gilt yields, particularly for schemes not fully hedged.
At a recent XPS event, representatives of over 300 pension schemes were surveyed about their schemes’ buyout position. Of those:
• 95% had seen their buyout position improve, with 23% seeing an improvement of more than 20% in their position.
• 79% said they would begin carrying out buyout-related work within the next two years.
Jo Carter, Partner in Risk Settlement at XPS Pensions Group, said: “Recent market moves have created some interesting dynamics in the bulk annuity market. With rising interest rates, the level of insurer premiums is falling and so insurers need to write more or larger transactions to hit their target volumes. However, bandwidth constraints at insurers mean they are becoming more selective when deciding which schemes to bid for, focusing on well prepared schemes with a high degree of execution certainty.
For those schemes pursuing buyout but concerned about attracting insurer attention, it’s important to monitor the market closely for opportunities, be flexible on timing and consider whether partnering with one insurer could deliver better results. For smaller schemes in particular, a streamlined approach could make the difference.”
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