Time to buyout for FTSE 350 DB schemes halves over 2022

The time to buyout for FTSE 350 defined benefit (DB) pension schemes halved over 2022, falling from 10.5 years in January to 5.1 years in December, analysis from Barnett Waddingham has found.

Using the DB End Gauge, which is calculated using publicly available data collected from the annual accounts of the FTSE 350 companies, Barnett Waddingham discovered that the average time to buyout fell by over 50 per cent last year.

The data revealed that the months with the biggest drops in buyout time were April and May whilst February and November were the only two months that saw a slight increase in buyout time.

Barnett Waddingham detailed that the increase in buyout time over November was driven by a rise in bond yields causing liability values to fall and that this decrease in liability values outweighed the fall in asset values over the month, resulting in improved funding levels.

This increase comes despite, according to Barnett Waddingham, “growing economic pressures in 2022”, which saw the Bank of England’s intervention in the gilts market to protect pension funds, the trajectory towards buyout for DB pension schemes has remained resilient throughout the year – pointing to the significant improvement in buyout pricing over the year.

Barnett Waddingham partner, Simon Taylor, commented: “2022 was a turbulent year for UK markets to say the least, with the situation in Ukraine, massive political uncertainty, and a volatile gilts market all posing a threat to DB endgame strategies.

“Despite this, DB pension scheme funding is now in the best position it’s been for a long time – with most FTSE companies now within half a decade from buyout.

“In the face of a national recession and gloomy economic climate in 2023, the pressure is now on for trustees and companies to maintain momentum in relation to their DB endgame strategy as other issues compete for limited management time."

Taylor also stated that, given recent financial market volatility, the strong funding position of the UK’s DB schemes could prove to be transient, so it is crucial for trustees and companies to take advantage of the opportunities currently available.

“The frenzied bulk annuity market we’re already seeing in 2023 should be warning enough for trustees and companies to get their houses in order before approaching insurers, or they could risk walking away with their tails between their legs,” Taylor added.

    Share Story:

Recent Stories


Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios

Advertisement