Could the defined benefit risk transfer market exceed £70bn in 2026? WTW’s experts certainly believe so, and there is a lot of evidence to support the continued vibrance of the bulk annuities sector, as Nick Reeve reports.
UK pension schemes are expected to insure more than £70bn worth of liabilities through buy-ins, buyouts and longevity swaps this year, according to new research.
WTW’s forecast comes as the bulk annuities market continues to thrive, despite an expanding menu of endgame options available to trustees.
More than half a trillion pounds worth of pension insurance transactions have now been completed, according to multiple estimates, and with more than £1trn in liabilities still being managed by private sector defined benefit (DB) schemes, consultants believe the market has much further to run.
WTW says its £70bn figure includes an expected £20bn worth of longevity insurance transactions, on top of around £50bn in bulk annuity deals. The forecast for this year is a 15% increase on the consultancy’s estimate for total activity in 2025.
“Schemes that plan early and engage collaboratively with the market will be best placed to secure exceptional outcomes for their members.”
Gemma Millington, WTW
It follows a similar prediction from LCP at the start of this year of £40bn to £55bn, with the upper end assuming a continuation of the attractive pricing conditions seen through 2025, alongside a substantial pipeline of transactions already reported by insurers.
“The risk transfer market is entering 2026 with strong momentum,” says Gemma Millington, senior pensions risk transfer director at WTW. “Schemes continue to benefit from improved funding levels and strong insurer appetite, which together create very favourable conditions in which to secure members’ benefits at compelling prices.”
While the consultancy’s projection means plenty of opportunities for DB scheme trustees exploring the insurance market, Millington cautions that they “will need to be prepared and strategic to take full advantage”.
“Schemes that plan early and engage collaboratively with the market will be best placed to secure exceptional outcomes for their members,” she adds.
Competition driving a vibrant market
One of the key drivers of the strong outlook is the level of competition among insurers. Over the past few years, new providers have entered the market, such as Utmost and M&G, providing additional options and innovative solutions for trustees.
M&G recently announced that it had reached £1bn in liabilities insured through its bulk annuity business. Legal & General is aiming to write between £50bn and £65bn in new business by 2028.
Insurance companies’ strong appetite for taking on pension schemes is further demonstrated by recent acquisition activity.
Pension Insurance Corporation was acquired by European insurance giant Athora in July, swiftly followed by North American firm Brookfield’s planned purchase of Just Group. Just will be merged with Brookfield’s subsidiary Blumont, with the Just brand remaining.
In December, Utmost announced that its life and pensions arm – including its nascent bulk annuity business – was to be acquired by JAB Insurance, a US-based life insurer.
In its report, WTW says this activity is “unlikely to materially affect the market”, but trustees should still ensure they conduct “thorough financial due diligence” on any insurer and ensure they are “alive to any short-term operational or cultural disruption”.
“Increased competition and tighter credit spreads are compressing margins on new bulk annuity deals, although they remain high compared with other life and savings products.”
Moody’s
In September last year, ratings agency Moody’s set out that bulk annuity demand would be a continued source of growth for UK life insurers over the next few years. Annuities accounted for 71% of the combined operating earnings of the six largest bulk annuity providers between 2022 and 2024, it reported.
However, Moody’s also highlighted that increased competition for new transactions and assets to back pensions were beginning to weigh on profitability.
“Increased competition and tighter credit spreads are compressing margins on new bulk annuity deals, although they remain high compared with other life and savings products,” Moody’s stated.
“The entry to the market of alternative asset managers via the acquisition of established providers this year will likely further intensify competition.”
Regulatory scrutiny and investment risks
It may not be all plain sailing for insurance companies, however. Over the past 18 months, the Prudential Regulatory Authority (PRA), which oversees insurers, has voiced concern about the use of “funded reinsurance”.
The PRA is concerned that the practice – which involves insurers bundling together investment and longevity risk and offloading this to a third party – could give rise to “regulatory arbitrage” or “underestimation of risk”.
In September, LCP’s Gavin Smith warned that this “could signal new rules imposing limits on the structures used or requiring insurers to hold more capital”, which could in turn push up the cost of bulk annuities or reduce some insurers’ capacity to take on more pension schemes.
“Insurers have continued to evolve their asset-sourcing capabilities… helping to maintain pricing strength despite potential regulatory shifts.”
Gemma Millington, WTW
However, WTW’s report this week argues that there will be “only limited impact on overall market dynamics”.
WTW’s Millington explains: “Insurers have continued to evolve their asset-sourcing capabilities, in some cases through new global asset manager relationships, which is helping to maintain pricing strength despite potential regulatory shifts.”
In its report last year, Moody’s also cautioned on the risks involved in sourcing illiquid assets, as insurance companies have increasingly turned to private markets for investments to back the pension liabilities they take on.
“Bulk annuity providers typically use illiquid, and often private, assets such as equity release mortgages and infrastructure debt to match their annuity liabilities,” the ratings agency stated.
“These offer a premium yield to compensate for their limited liquidity, and receive favourable treatment under the UK solvency regime.
“Growing competition for private credit and more accommodative regulation may encourage some insurers to turn to new or lower quality alternatives, but we believe the consequent increase in asset risk is well mitigated and manageable for now.”
The importance of customer service
The changing nature of the UK DB sector and greater competition among insurers have led to more scrutiny of the services that companies offer when taking on pension scheme members.
WTW’s report outlines that the dramatic shift in DB funding levels since 2022 has led to trustees focusing less on price and more on service. In addition, the prevalence of deferred members in transactions has meant a greater emphasis on the need for insurers to offer at-retirement services.
This is certainly reflected in the way in which bulk annuity deals are reported, with many press releases now highlighting the importance of post-transaction member services as a key decision-maker for trustee boards.
“Insurers are investing heavily in technology, with administration and member experience being a strategic priority.”
Imogen Cothay, LCP
Last month, LCP predicted that member experience was expected to move further up the agenda for trustees considering buy-in or buyout. The consultancy said all active insurers would be able to offer online benefit modellers by the end of the year, with more than half offering online self-service retirement.
Imogen Cothay, partner at LCP, says: “Insurers are investing heavily in technology, with administration and member experience being a strategic priority. This will benefit schemes of all sizes, with more efficient journeys to buy-out, and a boost in online functionality for members as digital engagement becomes the norm.”
WTW’s report states: “Member focus and risk management will remain paramount to trustees who will look for providers to demonstrate a ‘member-first’ outlook and evidence strong risk policies in areas such as cyber, where the headlines have demonstrated there is no cloak of invisibility for any given sector or business.”
Moving from buy-in to buyout
WTW contends that insurers able to provide the “smoothest” path from buy-in to buyout will likely benefit in 2026. The consultancy says some schemes have experienced delays in completing the journey to buyout and wind-up due to limitations on administrator capacity, as well as “insurers facing a queue of schemes seeking to finalise data cleansing”.
Jill Ampleford, partner and head of trustee consulting at LCP, told Pensions Expert last year that one of the biggest challenges facing the DB sector was “the growing number of schemes that have completed full buy-ins but remain stuck in the long tail to buyout and wind-up”.
“Insurers have written record volumes of transactions in recent years, and this surge in activity combined with operational pressures across administrators means that schemes can find themselves in an extended holding pattern,” Ampleford said.
“The key challenge for 2026 will be maintaining momentum without being overwhelmed by regulatory, operational, and market-capacity constraints.”
However, those pension schemes that are well prepared are more likely to be able to transition quickly, as demonstrated by some recent deals. The DB scheme for Finnish airline Finnair was able to move from buy-in to buyout in around two months when it secured a £4m deal with Aviva last year, while Deloitte’s buy-in with Standard Life, completed last month, is scheduled to move to buyout by April.
WTW says it has observed several solutions being proposed to “accelerate timescales”, while some trustee boards have shown willingness to use scheme surpluses on these additional services. With the Deloitte deal, for example, Standard Life has agreed to handle GMP equalisation once the buyout is complete.
Whatever 2026 has in store, it seems certain that there will be more activity and innovation from insurers and consultants to support a maturing DB sector to fully secure member benefits.
