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In November 2008, Cass Business School held a breakfast seminar jointly with Palgrave Macmillan, publishers of Pensions: An International Journal . The event was very successful, attracting an audience of professionals and academics from the pensions field, and it has led to this special issue of the journal on the pensions buy-out market.
The purpose of this Editorial is to establish some initial thoughts on this market and to set the scene for the contributed papers.
Until recently, most of the bulk annuity business transacted by UK insurance companies was what could be described as 'full buy-out'. Much of this business has related to the wind-up of small defined benefit pension schemes, which were forced down this route because of the insolvency of the sponsoring employer. For most pension schemes, the full buy-out rate was too expensive and the market capacity was rather limited for this to be a viable risk management option.
Buy-out has become a topical issue in recent months; DB schemes that would not have thought about the option a year or two back are now quietly reflecting on whether it might solve a problem for them or for their plan sponsors....