The buyout deficit of FTSE 350 pension schemes has reduced by £2.5bn since the introduction of Freedom and Choice due to an increased number of transfer exercises, Barnett Waddingham has found.
Around 10% of FTSE 350 listed schemes have carried out a pension transfer exercise since 2014, while the number of schemes able to reach buyout within the next five years is expected to rise by a third.
This would be helped along by improving communication to non-retired members and offering members access to advice from an independent financial adviser, increasing take up of a transfer exercise by around 25%.
The consultancy also found pension payments have gradually increased over the last five years. Payments were £31.2bn in 2016, while £42bn was paid out in 2017. However, payments dropped slightly to £38.5bn in 2018.
The firm looked at contributions, assets and liabilities data from the FTSE 350 companies that have defined benefit (DB) pension schemes and estimated that 73% of the increase in payments is due to increased transfers.
Partner Simon Taylor said: "With increasingly volatile markets, the risks facing DB pension schemes and their sponsors are greater than ever. It's vital that schemes settle their liabilities in as short a timeframe as reasonably affordable.
"Those aiming to reach the endgame within five years need to focus on offsetting the liabilities ahead of an insurance buyout. Those working towards a longer horizon could see a more meaningful reduction to their endgame timescales following a transfer exercise, perhaps eighteen months or more."
He added: "It's crucial that companies encourage member engagement with their benefit options across the span of their career, and especially for employees reaching retirement. Providing access to impartial, professional advice from a qualified adviser is one way of ensuring that employees are making the decision which is most appropriate for their short, medium, and long-term goals."
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