Ten companies listed on the FTSE 100 are actively considering pension buyouts as the credit crunch makes passing off retirement liabilities ever more attractive, it was revealed this morning.
A report by actuary Lane, Clark and Peacock (LCP) showed a seven-fold increase in the pension liabilities bought by insurers in the past six months.
Pension buyouts see an employer relieved of its duty to pay employees’ pensions by paying a sum of money to a specialist insurer to take that duty on. They are often seen as attractive to trustees as insurers have to pass strict tests under Financial Services Authority (FSA) regulations before they can buy pension liabilities.
Publishing giant Emap blazed the pensions buyout trail last November, paying £40m into its pension pot to hand over its retirement liabilities to insurer Paternoster. Now LCP says the trend is growing fast.
“We see the milestone of the first major FTSE 100 company completing a buyout happening this year,” said LCP partner Clive Wellsteed.
The report predicted the first buyout deal worth £1bn and an overall market worth £10bn in 2008. More than £4bn of buyout business was written in the six months to 31 March this year.
Although trustees have the final say in whether to accept a price for a pension buyout, such deals are often instigated by employers, LCP said.