Four in ten schemes are being pushed towards risk transfer as a result of market volatility, according to MetLife Assurance.

New research from the company shows that 44 per cent of trustees are now more interested in transferring pension scheme risk, including the use of bulk annuities, and 55 per cent said they expect to see an increase in levels of activity for schemes opting for a bulk annuity.

Sixty-three per cent of schemes already employ longevity risk measures, and 91 per cent said that, in considering insurers, the most important attribute is financial strength, followed by competitive pricing. Forty-four per cent of companies opting for a buy-in saw this as a standalone decision, while 34 per cent view this as a gradual step working towards a full buy-out in the next five years.

"Trustees appear to hold themselves to a high standard when pursuing a pension risk transfer exercise, of both wanting to enhance the security of member benefits and protecting the corporate sponsor balance sheet," said Emma Watkins, business development manager at MetLife. "Although these two objectives may initially appear to be conflicting, a well designed de-risking strategy should fulfil these requirements."

The survey found that 63 per cent of schemes have longevity risk measures in place, and 53 per cent said asset risk hedging solutions are likely to be implemented in the next two years. Member options (45 per cent), buy-in (34 per cent) and data cleansing (31 per cent) will also be looked at.

"Our research findings show that current market volatility is prompting trustees to think seriously about risk transfer for their pension schemes. For those trustees who are feeling exposed to risk but may not be ready for a full buy-out, we would strongly encourage them to consider a number of de-risking strategies, including data cleansing and asset liability matching as potential first steps," Watkins added.

- Pensions Age March 2009

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