FTSE 350 firms face significant financial risks from early buyouts of Defined Benefit pensions. Analysis shows that optimal strategies could increase surplus value from £17bn to £20bn. Upcoming legislation may allow schemes to access surpluses without full insurance buyout, potentially unlocking £38bn more than current rules allow. Despite this possibility, many firms may benefit from running their schemes beyond a buyout level, with 67% better off by not opting for immediate buyouts. Only a third would see the most value from a timely buyout.
New analysis reveals that FTSE 350 firms risk missing out on £3bn in surplus value by buying out Defined Benefit pension schemes too early.
If FTSE 350 companies adopt optimal endgame strategies, surplus available could rise from around £17bn to £20bn, benefiting shareholders.
Under proposed changes, FTSE 350 firms may access up to £38bn more in surplus than current rules permit, increasing the total from £29bn to £67bn.
Most FTSE 350 firms would benefit more from running their Defined Benefit schemes beyond a buyout funding level rather than buying out immediately.
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