UK pension buyout volumes are likely to have declined in 2016 compared with the past two years, according to data from JLT Employee Benefits.

It is an indication that pension funds are delaying de-risking transactions due to “a widespread misconception” that low interest rates make buy-in or buyout deals less attractive, JLT said.

Ruth Ward, senior consultant at JLT, said: “We are aware of plenty of cases where schemes have been ready to complete a buy-in or buyout but have delayed in the expectation of an improvement in pricing that has just not materialised.”

The UK’s base interest rate was cut to 0.25% in August, following the country’s vote to leave the European Union, after more than seven years set at 0.5%.

The yield on 10-year Gilts fell to a record low of 0.518% in August.

At close of trading on Friday, 10-year Gilts were yielding 1.438%.

Pension schemes need to determine the risk of delaying transactions while liabilities deteriorate, JLT argued.

Despite the difficult market conditions, even pension funds of less than £1m have been able to obtain buyout quotes, Ward added.

“Trustees and sponsors should insure their liabilities as soon as they can afford to do so,” she said.

“There is no guarantee the position will look better in future, and, even if it does, it may prove more difficult to get a quotation and execute a transaction.”

Ward recommended that pension funds consider insuring pensioner liabilities first, before moving on to other parts of their liabilities.

The ICI Pension Fund, which has advocated this approach, completed five separate buy-in transactions this year as it continued its opportunistic approach to de-risking.

JLT’s quarterly buyout market report predicted that total transactions in 2016 would be lower than the £12.4bn in 2015, and £13.2bn in 2014.

Among 2016’s largest deals were a £1.1bn buyout of the Vickers Group Pension Scheme, backed by Legal & General, and a £1bn longevity swap involving the Electricity Supply Pension Scheme and Abbey Life.

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