On the go: The bulk annuity market is expected to quadruple in the next decade compared with the current one, which saw £135bn paid to insurers, according to estimates from Mercer.
The growth to £540bn is expected to be driven by a combination of factors, but mainly lower pricing as more schemes mature and additional reinsurers enter the UK market, the consultancy firm stated.
According to David Ellis, partner at Mercer, the next few years are looking bright for those schemes wishing to insure their members’ retirement income.
“As the UK’s defined benefit schemes mature, the length of insurance contracts reduce, making them more predictable and cheaper to buy,” he said.
“Despite the increased demand, there is still capacity in the market for well-prepared schemes.”
By the end of 2019, Mercer expects the bulk annuity market to exceed £40bn, with the total UK risk transfer market – including longevity swaps – expected to hit £50bn.
Mr Ellis added: “Schemes that want to take risk off the table need to do their homework before they approach insurers.
“Key steps include understanding the range of options available and choosing the best approach for the scheme, putting the right governance and decision-making structures in place and getting data and benefit information ready for transaction.”
Mercer has also seen strong demand for member option exercises during 2019, predicting a total of more than £20bn of individual DB to defined contribution transfers – both via bulk exercises and individual requests.
