UK - In an attempt to kick start the defined benefit (DB) buyout market Paternoster has urged trustee boards to buy now while rising bond yields force prices down.
Paternoster said the findings of a pricing analysis revealed the cost of buying-out pension liabilities for UK companies had reduced over the past 18 months.
In addition, Paternoster found the cost to buy-out pensioners had reduced by 6.5% and the cost to buy-out deferred scheme members had dropped by more than 11%.
Mark Wood, chief executive of Paternoster, commented: "This cost reduction is predominantly due to the increased yields on bonds invested, as the cost of providing a given level of pension falls as yields rise.”
He continued: “There is a danger that only with the benefit of hindsight will trustee boards and their advisors see that they may have missed an opportunity to secure their defined benefit pension promise by buying out schemes as deficits close.”
Despite Wood's view, Con Keating, pension fund trustee and principal at the Finance Development Centre, commented: “This sounds remarkably like a buy now before stocks perish sale.”
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