The arguments for buy-out go back to Paternoster days
I admit to being a little frustrated by yesterday’s Pension PlayPen coffee morning which did not yield very much to the small audience that had gathered to hear Hymans Robertson talk of the risk transfer market.
You can watch the video of the event here, it tells the story of the 2024 buy-out market well and Claire and Iain have a good grasp of the dynamics driving employers and trustees to pack it in.
But questions remain. Yesterday, the FT published an article suggesting that schemes are (for a second time) off-loading illiquid assets in a fire-sale. In 2022 it was to meet collateral calls from LDI, today it is to get buy-out ready.
Portfolios of private assets are being dumped by so-called defined benefit pension schemes — funds offering members a set amount in retirement — as they try to prepare themselves for a buyout by an insurance company. This typically involves offloading illiquid assets that the insurer will not accept as part of the deal.
I am seriously concerned that as well as paying the insurer’s hefty premium to offload the liabilities, the trustees are selling the family silver at a hefty discount in the rush to buy-out.
The actuarial profession has produced TAS300 to ensure that advice to trustees fully considers alternatives to buy-out. It is irresponsible to present buy-out without a proper context and I fear we may have been irresponsible yesterday
We were promised a debate but got only half of one. This was my fault, I should have briefed Hymans better. Apologies to those who came who may feel a little short-changed.
We must try harder!