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A half yearly
Buyout Market Watch report was launched yesterday (10 July) by Pension
Capital Strategies Limited (PCS), reviewing the last 12 months in
the buy-out market with a view on the market for the rest of 2008
and long term.
According to the report, the Affordability Index suggests that it
is the best time to buy-out for at least a decade, and predicts
that there will be over £10bn of new bulk annuity business
written by the end of 2008. It also predicts that there will be
one or more large deals by the end of the year, which will break
the current £800million record.
PCS also identified four key factors to which the attraction of
a buy-out solution is linked, regulations, the financial health
of the pension scheme, the excess cost over the accounting reserve,
and market sentiment.
Charles Cowling, managing director at PCS, said: “We have
seen increased development in the buy-out market over the last 12
months and its growing impact on Defined Benefit pension schemes.
We predict prices will continue to be low for the rest of 2008 with
the gap between IAS19 and buy-out becoming even lower for immediate
annuitants.”
He added that growing pressure from the Pensions Regulator and changing
accounting standards “are encouraging de-risking in pension
schemes. Companies, therefore, need to face their pension commitments
head on, particularly if they are looking at re-structuring or merger
opportunities. Increasingly this means looking at buy-out opportunities.”
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Pensions Age July 2008
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