Most UK Pension Sponsors Still not Keen on Pension Buyouts

November 5, 2008 ( - Only one-in-five (20%) large UK corporate pension plan sponsors are giving serious thought to selling off their final salary pension obligations in whole or in part, according to the results of Greenwich Associates' 2008 United Kingdom Pension Fund Study.

According to a Greenwich Associates press release, virtually all of the companies contemplating such a move have pension fund assets of £2 billion or less. Among companies with bigger funds, virtually none (2%) say they have considered the buyout option.

A year ago, Aon Consulting similarly found the predicted rush by U.K. companies to pay third parties to take pension schemes off their hands was failing to materialize (See Rush to Offload DB Plans Hasn’t Happened ).

The Greenwich study also indicated that final salary pension plan closures have stabilized. The press release said the proportion of UK final salary plan closures was unchanged from 2007 to 2008 after several years of consistent increases.

Greenwich announced Tuesday that its study indicated pension schemes are also less dedicated to equity investments (See UK Pensions Equity Following Over? ).

Greenwich Associates' 2008 United Kingdom Pension Fund Study found defined contribution plans currently hold approximately 5% of total UK retirement assets, but plan sponsors expect that share to jump to more than 20% by 2018.

DC plans already account for a meaningful share of total retirement assets among the country's smallest companies. Corporate plan sponsors with less than £200 million in plan assets say their DC plans now hold more than 23% of assets, a share they expect to top 30% in the next 10 years, the Greenwich press release said.

Virtually all corporate plan sponsors in the United Kingdom offer DC plans to their employees and about one in 10 say they plan to open a new plan within the next two years.

Among DC plans, sponsors are adding improved offerings as well. In addition to the increasing use of features such as automatic enrollment, about 10% of plan sponsors say they have plans in place to offer participants products including new balanced funds incorporating a broad range of asset classes, lifestyle funds, or alternative assets. Slightly smaller shares say they plan to offer DC participants multi-manager options or property unit trusts.