UK - The number of pension funds seeking buyout quotations has risen dramatically over the first half of 2007, claim new figures by Aon.
In 2007, Aon said the quarterly average number of funds requesting costing and operational information from buyout specialists reached 276, compared to 193 in 2006.
Commenting on the findings, Mark Wood, chief executive at Paternoster, said: “The pace at which quotation requests have risen has in the last few months been really surprising. The scale and rapidity is unlike anything we’ve seen in the market.”
Aon’s research also found that the number of actual transactions had fallen from a quarterly average of 84 in 2006, to 62.5 in 2007. However, in Wood's view this was not entirely unexpected.
He said: “Previously the market was concentrated with insolvent schemes, but the flow of them has begun to dry up. Companies now looking into buyouts are solvent and wanting to derisk their pension schemes: they are considering the many options now available.”
Aon also found the value of schemes which actually carried out a buy out was considerably less than the average of those requesting quotations.
Meanwhile, in the first half of 2007, funds which went through with a buyout had an average £4m in assets.
Paul Belok, principal and actuary at Aon Consulting, said the lack of growth in the market could be explained by a number of barriers: “These include the fact that many schemes remain open to future accrual for at least some employees, as well as the potential emergence in some circumstances of cheaper alternatives to [a]buyout.”
Belok added: “The decision-making and implementation process in relation to buyouts can also be very laboured, often extending over months if not years.”
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