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


A time for fixed income
Francesca Fabrizi discusses fixed income trends and opportunities with Goldman Sachs Asset Management Head of UK Pensions Solutions, Fixed Income Portfolio Management, Henry Hughes, in our Pensions Age video interview

Purposeful run-on
Laura Blows discusses purposeful run-on for DB schemes with Isio director, actuarial and consulting, Matt Brown, in Pensions Age’s latest video interview
Find out more about Purposeful Run On

Keeping on track
In the latest Pensions Age podcast, Sophie Smith talks to Pensions Dashboards Programme (PDP) principal, Chris Curry, about the latest pensions dashboards developments, and the work still needed to stay on track
Building investments in a DC world
In the latest Pensions Age podcast, Sophie Smith talks to USS Investment Management’s head of investment product management, Naomi Clark, about the USS’ DC investments and its journey into private markets

Advertisement