The UKs 100 largest listed companies are set to transfer £300bn of pension liabilities to insurers through full buy-outs over the next decade, up from just £5bn today.
That is according to a new report from consultancy firm Lane Clark & Peacock (LCP), which said improvements in affordability have led to a "new phase" for the buy-out market.
The analysis shows that buy-outs from FTSE 100 defined benefit (DB) schemes have been hindered by companies' large deficits and £800bn in legacy pension liabilities.
But the average scheme has seen its buy-out funding position improve by 10% over the past two years amid falling life expectancies and strong price competition between insurers.
If current conditions persist, LCP predicts that up to 40 FTSE 100 companies are likely to reach, or be close to being fully funded on buy-out within the next decade.
"In the short term, the insurance market is entering a pension scheme buy-out boom due to increased affordability and attractive pricing," LCP partner, Charlie Finch, said.
"As the demand for buy-ins and buy-outs grows, the key question is whether the market is approaching a tipping point where pension plan demand outstrips available insurance capacity."
LCP said that the availability of suitable investments to support current pricing levels is the most pressing constraint that could impact insurer capacity in the UK.
And from an operational standpoint, the number of transactions cannot increase significantly without insurers expanding their teams or further developments in technology.
This comes after separate research found that the number of UK DB scheme trustees targeting buy-outs with insurers has increased threefold over the last five years.
"At the current rate of growth, demand looks set to outstrip capacity over the medium term putting upward pressure on pricing and squeezing less attractive schemes out of the market," Finch said.
"What is clear is that 2019 is set to be another bumper year for companies and trustees getting on top of their pension plan risks and liabilities."
