How schemes and providers are innovating to expand the range of options available for endgame planning.
More than £50bn worth of bulk annuity business is estimated to have been written in 2023, including a record number of large deals.
A new report from Legal & General (L&G) on the bulk annuity market is the latest to assert that the total volume of pension insurance transactions was a record for a calendar year.
The insurer highlighted large transactions and innovative approaches to de-risking as key influences, and predicted that the £50bn level would become the norm for the next few years.
Last year, the British Steel Pension Scheme became the largest in the UK to fully insure all benefits, after it secured its fourth and final buy-in with L&G in May, worth £2.7bn.
This was one of five deals worth more than £2.5bn that were completed in 2023, L&G reported, which compared to just one such large deal in 2022 and 10 completed between 2014 and 2022.
A Hymans Robertson report into the bulk annuity market, published earlier this month, similarly predicted an increased number of large transactions for the year ahead.
A separate report from WTW has forecast that transaction volumes could hit £80bn this year.
Partnership approach
As activity and competition within the bulk annuity market has increased, L&G’s report said schemes had begun to move away from an open auction approach to finding a supplier to partnering with an insurer for multiple transactions.
This approach, L&G said, meant schemes and insurers could “work collaboratively towards a transaction, and being able to take advantage of favourable movements in market conditions over that period of collaboration”.
The British Steel Pension Scheme’s quartet of buy-ins with L&G was “a good example of such a strategic partnership in action”, the insurer stated.
By working closer with one insurer, L&G said schemes can come up with bespoke approaches to de-risking that are better suited to their unique situations, particular with regards to private market assets.
“The recent rapid improvement in funding levels has meant that many schemes have reached buyout funding earlier than anticipated, and before their illiquid asset holdings have matured,” the report stated. “The insurance market has been innovating in this area, providing solutions to help schemes transfer or sell their illiquid assets alongside a transaction.”
LCP and Hymans Robertson have both forecast that two new insurance companies will enter the bulk annuity market this year, although they have not revealed their identities.
