The pension buy-out market for 2009 will match levels reached in 2008, claims Lane Clark & Peacock LLP (LCP).

Despite a slow start to the year, 2008 managed to rake in around £8bn in business for buy-outs, and LCP's latest Pension Buy-out report predicts that 2009 will repeat this.

Pricing is expected to become more competitive as the aftershocks felt from the Lehman Brothers collapse begin to settle and insurers' confidence returns.

However, LCP said that it also expects pensioner-only transactions - buy-ins - to dominate the market. Longevity swaps, offering an alternative to buy-in for schemes looking to reduce exposure to the risks of improving life expectancy while retaining direct control of their assets, were also highlighted as a point of increased interest in the report.

Buy-out market could match 2008 levels"Despite the financial whirlwind following the collapse of Lehman Brothers, the market ended the year on a high as December saw the market's second best month ever for business written," said Clive Wellsteed, partner at LCP.

"Even with the gathering economic doom and gloom, we are upbeat about the market's prospects in 2009, particularly for transactions covering pensioners only. However depressed markets mean that full buy-out is firmly out of reach for most pension schemes invested in equities."

Wellsteed said that the attraction of buy-ins is that they can be achieved without a significant cash injection from employers. "With most businesses suffering as the recession takes hold, risk can be reduced on the corporate balance sheet without tying up valuable cash. For the trustees of pension schemes, transferring risk to an insurance company is often a welcome trade-off against a deteriorating employer covenant and likely to be on the agenda for many pension schemes in 2009," Wellsteed concluded.

- Pensions Age January 2009

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