The number of DB schemes within the FTSE 350 able to buyout within the next five years could increase by a third — if further pension transfer exercises are carried out.

Barnett Waddingham has said that bulk transfers can accelerate a scheme’s move to a buyout deal and ensure that liabilities are settled in the most cost-effective way.

Its claim comes after the consultancy calculated that the combined pension buyout deficit of FTSE 350 schemes has been reduced by about £2.5bn since 2014, mainly due to the pension transfer exercises carried out by roughly 10 per cent of the companies on the index.

Although bulk transfers can be costly for schemes and sponsors if enhancements are offered, Barnet Waddingham believes that the cost of a transfer value can be lower than the insurance premium for buying out benefits, if managed correctly.

It said that, given the current low-yield environment, transfers look attractive even without enhancements, which means that they could be even more cost effective should trustees decide to pursue such a strategy.

The company has said that businesses could see a “drastic impact” from transfer exercises that involve communicating transfer values to non-retired members in the over-55 age bracket and offering members access to advice from an IFA.

Exercises can see a take-up rate of around 20 per cent to 30 per cent for members aged over 55. “On this basis, the number of schemes potentially able to buyout within five years could increase by a third if all schemes carried out a transfer exercise in 2020,” said Barnett Waddingham in a statement.

Since 2015, benefits payments in bulk transfers have also been higher than expected, according to the consultancy. There was a slight drop in pensions payments from £42bn in 2017 to £38.5bn in 2018, although this still represents a significant increase from the £31.2bn paid in 2016.

Barnett Waddingham partner, Simon Taylor, said that the risks facing DB pension schemes and their sponsors was greater than ever due to increasingly volatile markets.

As a result, he said that it is vital that schemes settle their liabilities in as short a timeframe as reasonably affordable.

“Given the increased demand for flexibility from members, pension transfers are a core part of the discussion,” he said.

“It’s crucial that companies encourage member engagement with their benefit options across the span of their career, and especially for employees approaching retirement.

"Providing access to impartial, professional advice from a qualified advisor is one way of ensuring that employees are making the decision which is most appropriate for their short, medium, and long-term goals.

“For those running the scheme, timing is crucial. Those aiming to reach the endgame within five years need to focus on offsetting the liabilities ahead of an insurance buyout,” he continued.

“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. For these schemes, it may even be worth running more than one transfer exercise, so long as the gap between the two is long enough to reach a different group of employees and generate take up.”

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