The transfer of pension scheme liabilities is likely to accelerate over the next three years as companies struggle with deficits, reported a joint survey from Buck Consultants and the Economist Intelligence Unit (EIU).
The Future of corporate pensions survey found more than a quarter (27%) of company pension schemes plan to de-risk their portfolios over the next three years by transferring some of their liabilities to a third party.
One in every ten respondents, which represent a wide range of industries including financial and professional services, manufacturing and information technology, expect to transfer all liabilities off their balance sheets.
Fraser Smart, director at Buck Consultants, said: “Managing deficits is clearly the biggest worry for the majority of companies with DB pension schemes. In the period of strong equity growth and stable markets preceding the credit crunch, de-risking didn’t look attractive for many employers, because jumping off the merry-go-round locked in shortfalls.
“But with the outlook for economic growth still weak, the certainty that de-risking can bring to a balance sheet is now much more attractive for companies being held back by significant pension scheme shortfalls.”
This trend is fuelled by the fact that 41% of UK companies claim that managing increasing pension scheme deficits will be their biggest challenge in the coming years. Additionally, 73% of companies believe that defined benefit (DB) schemes will be extinct by 2019.
Smart said: “The DB system will be a thing of the past a generation from now – it relates to a job-for-life culture, not the working environment we have today. Instead of helplessly fanning the dying embers of DB, companies, employees and the government should embrace planning for the future in a predominantly DC culture.”
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