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Paternoster says DB buy-out costs have fallen

Paternoster says the cost of buying-out pension liabilities for UK companies has reduced significantly over the past 18 months.

The insurer which takes responsibility for the risks associated with companies’ final salary/defined benefit pension schemes announced the findings of pricing analysis which revealed that the cost of buying-out pension liabilities has reduced dramatically.

Key findings indicate that since January 2006 the cost to buy-out pensioners has reduced by 6.5 per cent and the cost to buy-out deferred scheme members has reduced by more than 11 per cent.

Paternoster chief executive Mark Wood says: “This cost reduction is predominantly due to the increased yields on bonds invested, as the cost of providing a given level of pension falls as yields rise.

“There is a danger that only with the benefit of hindsight will trustee boards and their advisors see that they may have missed an opportunity to secure their defined benefit pension promise by buying out schemes as deficits close. Additionally, prices are being influenced by increased competition in the market place.

“These price savings can only be positive for trustees looking to secure the benefits promised to their pension scheme beneficiaries.”

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