As the market for risk transfer and hedging of pension liabilities grows this year, news comes from Aon that the liabilities and obligations of UK companies to their pension funds have hit all time highs.
Combined pension liabilities for UK companies have increased by 20% over the last 12 months and now sit at an astounding £1.2 trillion and Aon call this total a significant risk. The main reason for the increase is the lower yields available on government bonds which a lot of pension schemes are invested in.
Marcus Hurd, head of corporate solutions at Aon Consulting, said: “Market conditions have never been as tough as they are today for final salary pension schemes. The value placed on pension scheme liabilities has now hit an unprecedented £1.2tn. Traditional scheme investment strategies are struggling to keep pace in rapidly moving markets.”
With this in mind it’s unsurprising that analysts are forecasting that longevity risk transfer is going to grow rapidly. It would be extremely desirable to get pension liabilities off your balance sheet at the moment.
Marcus Hurd continued: “Pension scheme liabilities at this level pose a significant financial risk to UK businesses at a time when there are real fears that market conditions could deteriorate further.”