Pension scheme risk transfers deals worth £7.7bn were completed in 2009, and this figure will double in 2010, according to research from pensions consultancy Hymans Robertson.
The survey, Managing Pension Scheme Risk Report 2009, showed that the longevity swaps market took off last year with deals covering £4.1bn of pension scheme liabilities, while buy-ins and buy-outs covered £3.6bn of liabilities. The value of buy-ins was more than three times the value of buy-outs, £2.8bn against £0.9bn.
James Mullins, senior liability management specialist at Hymans Robertson, said: “Based on the level of activity we are currently observing, we would not be surprised to see longevity swaps cover liabilities in excess of £10bn in 2010.
“This is due to a number of drivers. One is that pension schemes are increasingly keen to manage away as much risk as they can. BT’s share price dropping due to concerns about the size of its pension deficit, and the assumptions used to calculate it is a case in point. Pension schemes need to understand the risks inherent in their schemes and manage them appropriately. Longevity is widely viewed as one of the biggest unmanaged risks they face.”
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