Bulk annuity pricing remains the most important factor for trustees considering pension insurance, despite the recent increase in focus on post-transaction elements such as the member experience.
Recent research from Standard Life polling schemes with more than £100m in assets found that 95% rated pricing as “important”, rating it four or five on a scale of one to five.
Just over 90% of trustees targeting buyout rated the financial strength of their selected insurer as an important factor, and 88% selected member experience.
However, the research also showed that the most important factors for trustee boards can vary by the size of the scheme. Those between £100m and £250m tended to rank an insurer’s financial strength as the most important factor, while those with £250m to £500m in assets ranked pricing as the top factor.
“Pricing and member experience have always been key considerations for trustees, but it’s clear there is an evolution in priorities as surpluses remain resilient.”
Claire Altman, Standard Life
Trustees of schemes with more than £1bn in assets were most likely to rate contractual terms as the most important factor when selecting an insurer. Standard Life found that factors such as reinsurance and the ability to deal with illiquid assets often rank lower in importance, but this varied significantly by size.
Claire Altman, managing director for pension risk transfer and individual retirement at Standard Life, said: “Pricing and member experience have always been key considerations for trustees, but it’s clear there is an evolution in priorities as surpluses remain resilient.
“These findings underscore the importance of tailored approaches by insurers to meet the diverse needs of schemes across different sizes. While pricing remains competitive… financial strength and customer service are increasingly the key factors informing decisions.”
Altman added that higher inflation and interest rates, combined with geopolitical risk and asset volatility, meant trustees were “increasingly focused on how to secure the funding gains they have made”.
Despite the prospect of defined benefit scheme trustees being able to access surplus through flexibilities to be introduced through the Pension Schemes Bill, around half of schemes with £1bn or more in assets were still targeting buyout, the research showed.
“With insurer capacity expanding and deal volumes remaining high, the data reflects that trustees are prioritising long‑term financial resilience, operational capability and the member experience that will follow a transaction,” she said.
