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DB transfers to top £60bn over next three years

Consultants Mercer estimate nearly one third of a trillion pounds will be paid out from defined benefit schemes between 2019 and 2021.

The record amount is due to large numbers of active and deferred members expected to transfer to another arrangement alongside a rapidly growing buy-in and buy-out market.

This year has seen a record for premiums paid to insurers for buy-ins and buy-outs, with more than £20bn of DB obligations being insured.

Mercer forecasts this market to grow again in 2019 and remain strong for the foreseeable future.

While many transactions in this market are strictly scheme investments rather than payments out of the scheme, they tend to be irreversible in nature and so are included in the overall amount paid by schemes.

Similarly the volume of transfer values taken by individual members has increased with statistics covering the first three quarters of 2018 showing aggregate transfer values of around £27bn.

Mercer expects this trend to continue, with broadly £60bn of transfer values being paid over the next three years.

Mercer partner Andrew Ward says: “A third of a trillion pounds is a huge sum of money and shows how the UK’s DB pension landscape is changing rapidly. In aggregate, UK company DB schemes are expected to be better funded and bear less risk in three years’ time. There are headwinds, not least the potential for Brexit to disrupt the landscape, but the direction of travel is clear.”

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