The value of buy-outs involving pension firms is set to rocket this year up to £10 billion, according to Lane Clark & Peacock (LCP).

The financial adviser expects the industry to undergo a four-fold increase on last year’s figures, after analysing data from the UK’s “leading insurance companies”.

The analysis in LCP’s Pension Buyouts 2008 report revealed that at least 10 per cent of FTSE 100 pension schemes are considering opportunities to buy-out some or all of their pension liabilities this year.

Competitive market rates, innovative structures and the “ability to partially transfer risk to an insurer without needing to close down a pension scheme” was cited as driving the upsurge.

LCP claimed that potential for further growth in the market is “huge”. It said that the largest buy-out transaction completed to date has been the £800 million deal to insure current pensioners in the P&O Pension Scheme. It added that the milestone could soon be eclipsed by up to seven “potential transactions over £1 billion.”

It was also revealed that the tough lending climate had stimulated market growth, “allowing insurance companies to use the higher yields available on investment grade corporate debt and other assets to reduce their prices.”

LCP’s partner Clive Wellsteed, who heads its pension buy-outs practice, said: “A year ago, many commentators were predicting that the pension buy-outs market would be a slow-burner, now the question is can insurers keep pace with demand from companies and trustees to offload risk.”

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