Consultants estimated that the volume of assets ready for buyout is more than the total volume executed since 2007.
"While better funding is positive news for corporate sponsors and scheme members, it will challenge pension schemes to secure a buyout, given demand will significantly outweigh provider supply," said Paul Kitson, U.K. head of pensions consulting at Ernst and Young, in an emailed comment.
"Despite buyout providers working hard to increase their volumes and new entrants coming to market, we expect a significant bottleneck for some time to come. Companies and trustees looking to buyout need to take action to stand out in a crowded market," Mr. Kitson said.
Tyron Potts, associate and head of pensions research at U.K. consultant Barnett Waddingham, said in a separate comment: "And while TPR is openly encouraging schemes to derisk if their funding level has improved, in spite of its warnings of potentially limited capacity in the buyout market, the regulator rightly suggests that well-funded schemes nevertheless ensure they are buyout ready."
"Being in a position to transact quickly will give a scheme a much-needed competitive advantage when a short-lived window of capacity opens up with an insurer — and so using advisers' knowledge of the buyout market will now become even more important," Mr. Potts added.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, commented that as more pension funds are expected have a surplus over the coming years and the market for buy-ins and buyouts might reach capacity, "PLSA would like to see the government proceed with finalizing the superfunds legislation to help with this."