UK pension buyout market to halve in 2009-survey

* Market for transferring pension risks to fall to 4 bln stg

* Buyouts to move beyond UK into continental Europe

* Longevity swaps market to grow

By Cecilia Valente

LONDON, June 3 (Reuters) - The corporate pensions buyout business will halve this year as companies struggle to afford such deals with insurers, consultancy Lane Clark and Peacock said on Wednesday.

The market for transferring pension scheme risks to insurers will fall to 4 billion pounds ($6.6 billion) this year, the consulting firm said in a report. In 2008, insurers still wrote 8 billion pounds in the buyout market.

"After the explosive growth in pension buyouts last year, the financial crisis has slammed on the brakes for now," said Charlie Finch, partner in LCP's buyout practice.

Yet the buyout market could yet receive a boost in the second half of the year as the financial crisis recedes and could reach 12 billion pounds in 2010 if markets continue to rebound through the next 18 months, LCP said.

In a more moderate recovery, LCP forecast the market to hit 2008 business levels next year.

Buyouts, so far limited to the UK pension landscape, will eventually be tried out in continental Europe too.

Martin Haugh, partner at LCP Ireland, told Reuters employers are likely to seal bulk buyout deals as they wind up their costly defined-benefit pension schemes.

"We expect to see a significant increase in the number of plan wind-ups in the next year. Among other things, this is likely to mean a significant increase in the pensions buyout market in Ireland," the consultant said.

While buyout deals may be beyond their means, pension schemes' sponsors are likely to look for alternatives to contain their pension-related risks.

Relatively unexploited longevity swaps, which insure the risk that scheme members live longer than expected, will be on the rise, LCP said.

Interest in longevity swap has increased after UK engineering and defence company Babcock International (BAB.L) became last month the first to launch a swap programme to hedge 500 million pounds ($820.7 million) longevity risk.

LCP said six more FTSE 100 companies are considering longevity quotes. (Editing by David Holmes) ($1=.6092 Pound)