Nearly two thirds (62 per cent) of defined benefit (DB) schemes are now expecting to be fully funded for buyout within the next three years, research from XPS Pensions Group has revealed.

XPS highlighted the findings of the poll, which included views from over 300 trustees and employers, as indication that demand for buyout is likely to increase given UK pension schemes’ funding position.

Indeed, XPS’s DB:UK tracker indicates that UK DB pension schemes as a whole are now around 95 per cent funded on a buyout basis, up from 69 per cent at the start of 2022, prompting increased activity in the bulk annuity market.

XPS' tracker also previously revealed an increasing demand for full scheme transactions over the past year, revealing that full scheme transactions in particular now "dominate" the DB bulk annuity landscape.

XPS head of risk settlement, Stephen Purves, stated: “The funding gains we have seen during 2022 have been locked into by lots of schemes via asset de-risking and we are seeing the demand for bulk annuities continuing to build significantly.

“As things stand, it’s clear that 2023 is already looking likely to be a record year.

"Currently the insurance market is coping with demand and pricing levels are still competitive, but as we progress through 2023, insurer capacity is likely to be stretched and insurers may become more and more selective.”

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