A more competitive market for small scheme bulk annuities means trustees need to be more discerning about how they approach the insurance market, according to Hymans Robertson.
Defined benefit (DB) pension schemes as small as £5m are now attracting interest from multiple insurers, the consultancy said in its latest annual report on the bulk annuity sector.
It highlighted the emergence of new providers such as Royal London and Utmost, both of which have focused on the smaller end of the market, while other insurers including Just Group and Aviva have also been very active in sub-£100m deals.
Increased competition means schemes have access to more choice and flexibility to better serve their members, said Iain Church, Hymans Robertson’s head of core transactions.
“Small schemes should embrace this changed dynamic and approach the buy-in and buyout process with a commercial mindset to achieve the best they can for the scheme and members,” Church said.
“By carefully considering their broking strategy, trustees can make the most of expanding insurer appetite, greater innovation and strong pricing conditions. Defaulting to a standardised process without carefully considering the market dynamics and what insurer opportunities are out there risks leaking value and could result in a poorer member experience.”
He added that some insurers are providing support in areas such as guaranteed minimum pension (GMP) equalisation and data cleansing, which was “reducing the administrative burden on trustees and providing certainty on buyout timescales”.
Those schemes that don’t consider opportunities fully “risk being caught in growing backlogs for buyout” as well as incurring higher scheme costs, Church said.
Separately, First Actuarial recently advised on a full scheme buyout with the Hille Ergonom Pension Scheme, which also resulted in the distribution of surplus to members.
The scheme, which sponsored by lighting company Zumtobel, completed a £4m buyout with Aviva late last year, securing the benefits of 56 pensioners and 18 deferred members.
Capital Cranfield was the professional sole trustee for the scheme, which is sponsored by a German lighting company, while Walker Morris provided legal support through a process that included GMP equalisation.
Chloe Davies, risk transfer consultant at First Actuarial, said: “As well as securing the benefits of 74 members, finalising the transaction resulted in a refund from Aviva. This was a real positive as it covered all remaining project expenses and even left a surplus.
“Capital Cranfield negotiated with the sponsor to reach a pragmatic solution, obtaining agreement for expenses to be reimbursed and for some surplus to be distributed to members. This allowed us to make welcome one-off payments to members just before Christmas 2025.”
