On the go: Total buy-in and buyout volumes reached £12.6bn in the first half of this year, the second-highest value on record, according to analysis published by LCP.
This figure represents a 50 per cent increase when compared with the £7.8bn achieved in the first half of 2018, which LCP attributed to the resilience of the pensions derisking market during the coronavirus pandemic. However, it fell short of the record volumes obtained last year of £17.6bn.
A further £2.4bn has been announced since the first half, taking the 2020 total to £15bn, the report continued. Additionally, £12.4bn has been covered through longevity swaps so far this year.
LCP’s research shows that the market was dominated by three insurers. The Pension Insurance Corporation, Legal & General and Aviva together accounted for 78 per cent of total volumes.
Three of the transactions were more than £1bn, a sharp decline from the 12 transactions of that size recorded over the same period last year.
Pensions Expert has reported previously that the expectation was for 2020 to show fewer large deals, a factor predicted to open up space for smaller scheme transactions to fill.
The report confirms this prediction, with 22 mid-sized transactions — of between £100m and £500m — being recorded in the first half of this year, double the 11 deals recorded in 2019.
Commenting on the research, LCP partner Charlie Finch said: “At the start of the year we predicted buy-in and buyout volumes would reach around £25bn in 2020. With £12.6bn transacted in the first half of the year, the market remains on track to reach £25bn.
“Unlike many industries, the Covid-19 crisis has not reduced activity in this market.
“Indeed, the Covid-19 crisis has given rise to favourable insurer pricing for those schemes that could be nimble and move quickly,” Mr Finch added.
Imogen Cothay, partner at LCP, said: “Buy-in pricing has fallen back since April but continues to be at attractive levels. With some insurers having written less so far than last year, we expect there to be pricing opportunities towards the year-end, particularly for those schemes that can be nimble.
“Alongside the impact of Covid-19, we are seeing the development of capital-backed solutions that are providing new options for schemes considering their derisking journey. This includes defined benefit superfunds, where there is increased interest following the guidance issued by the Pensions Regulator in June, particularly where schemes have a stressed or insolvent sponsor.”
