Three-quarters (76 per cent) of professional trustees are experiencing delays in their buyout and wind-up processes following a full scheme buy-in, research from Hymans Robertson has revealed.

The report suggested the average delay was reported to be six months, while some reported delays lasting more than two years.

When respondents were questioned about the reason behind these delays, the highest percentage of respondents (23 per cent) said the key reason was guaranteed minimum pensions equalisation.

This was closely followed by insurer delays (21 per cent), data issues known at buy-in (19 per cent) and data issues unknown at buy-in (15 per cent).

The report also showed some smaller sources of delay, such as lack of project governance (7 per cent), benefit issues (6 per cent), sponsor appetite (2 per cent) and payroll transition (2 per cent).

Additionally, the report acknowledged the growth in the pensions risk transfer market, stating that 2023 saw a record number (£49.1bn) of buy-ins, while 2024 saw £47.8bn of buy-ins.

However, the consultancy noted that it is not only the value of buy-ins increasing as the number has also grown “sharply”, more than doubling from under 150 in 2020 to nearly 300 in 2024.

The report highlighted that there’s not only a strong demand for buyout, but also a fast-growing insurer resource to meet it.

In 2020–22, around 50 buy-ins converted to buyouts in a year, while this number increased to 75 in 2023 and over 100 in 2024.

The report also showed that the type of buy-in has changed in the past five years as well, as most buy-ins were partial buy-ins in 2020, usually for pensioners’ benefits, while in 2023, full-scheme buy-ins accounted for the majority of transactions.

The report also revealed concerns about the available resources, with 97 per cent of surveyed trustees having concerns in this area.

In particular, the biggest concern is about scheme resources for administration and administration projects, followed by resources at the insurer, and then the lack of project governance.

In terms of timeline, professional trustees said around 97 per cent of their schemes that completed a full buy-in are looking to convert to buyout within the next five years.

However, only 24 per cent of schemes worked on by the surveyed trustees have a buyout journey running on time.

The consultancy said this can materially affect the outstanding costs for a sponsor, and any surplus available at the end of the process for the sponsor or members.

However, the firm said that these delays can be avoided with the correct groundwork in place.

Hymans Robertson head of buy-out and wind-up transition services, Christine Cumming, said: “We are seeing a strong move towards buyout for pension schemes. With demand rising and delays becoming increasingly common in the buyout market, it’s crucial that schemes prepare early to get ahead of the curve.”

The consultancy suggested that the earlier defined benefit (DB) pension schemes prepare for buy-in, the more likely they are to avoid costly delays of moving to buyout and can ensure a high-quality member experience.

Despite innovation and increased capacity from insurers to meet the growing demand in recent years, Hymans Robertson said that moving from buy-in to buyout requires a lot of resources and can often take several years.

“One message we hear loud and clear from insurers is that pension schemes have not done enough to prepare to move quickly from buy-in to buyout,” Cumming said.

The firm noted that a DB pension scheme’s trustees and sponsors often underestimate the amount of pre-work required for buyout, adding pressure to a system where delays are becoming more commonplace.

Adding to this, Cummings stated: “We regrettably see delays becoming the norm in the buyout market where preparation was not started early enough.

“Getting good quality advice – and taking advantage of this knowledge - is more important than ever for a scheme looking to buyout.”

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