A Christmas sale of pensions is on the cards after Emap offloads staff liability

The next five weeks offer an unprecedented opportunity for human resources (HR) professionals to make a visible difference to their organisations through radical pension buyouts, experts have told Personnel Today.

HR and pension specialists believe the market conditions are ripe for employers to sell their pension liabilities before Christmas.

Publishing giant Emap led the way last week by paying £40m into its pension pot as the price of ‘selling’ its pension liabilities to insurer Paternoster.

Clive Wellsteed, partner at actuary Lane Clark & Peacock, said insurers were falling over each other to buy pension schemes before a possible tightening of the rules in January.

“We have seen an increased appetite from employers to look at buyouts as a way of managing risk,” he said.

“Prices have become attractive,” he added, “but this could be the time to grasp the chance – the opportunity could be short-lived.”

Insurers have to pass strict tests under Financial Services Authority (FSA) regulations before they can buy pension liabilities. And the FSA has indicated that it could ask them to hold greater reserves due to increasing life expectancy, which would push the price of buyouts back up, according to Wellsteed.

The Chartered Institute of Personnel and Development said the next few weeks offered a chance for HR directors to prove their worth to a company. Reward adviser Charles Cotton said: “This is an area where HR can show its understanding of the business needs of the organisation, and alert the business that there could be consequences of getting the decision wrong.

“It is for HR to be proactive in suggesting that the market situation means it could be in the organisation’s best interests to sell its pension liabilities.”

Is your pension scheme ripe for selling?

The key indicators that show a pension scheme should be sold are:

  • It has a high proportion of pensioners to employees
  • It is well funded so would not cost much to sell
  • It would make a forthcoming corporate deal easier.

Source: Lane Clark & Peacock

Comments are closed.