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Long Acre Life assesses whether pension buyouts are the best use of shareholder funds

The latest headline pension deficit figures, which suggest that the total defined benefit (DB) pension deficit of UK plc has more than doubled over the past year, provide yet more evidence that schemes are continuing to run extremely large, and unhedged, risks. Against this backdrop, de-risking DB pension schemes is now one of the most crucial challenges faced by scheme sponsors. In this article for Pensions World, Chairman of Long Acre Life, David Norgrove, suggests that the decision on whether it makes sense to use excess corporate cash to transact on a full pension buyout – where all liabilities are transferred over to an insurer – depends very much on the individual company and its alternative use of capital. That said, innovative approaches to pension buyouts may increase the appeal from a corporate finance perspective, with positive accounting implications to boot.

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