Mercer has predicted combined bulk annuities, longevity swaps and new risk transfer solutions to reach £60 billion during 2022.
This growth is attributed to a variety of factors, including pent-up demand and better affordability following significant improvements to funding levels of defined benefit (DB) pension schemes in 2021.
Innovation in alternative risk transfer options appears to be keeping pace to meet the challenges faced by DB schemes.
In particular, the long awaited announcement on DB superfunds provides a further impetus and Mercer expects to see the first transactions next year.
“We predict 2022 to be the busiest year on record with more ‘jumbo’ buy-in and buy-out deals and longevity swaps expected,” said Andrew Ward, UK Head of DB Risk, Mercer.
“With demand likely to stretch providers’ capacity for providing proposals and implementing transactions, being well-prepared with a clear understanding of deal criteria is vital.”
Reflecting on 2021, Mr Ward commented: that 2021 has been a year of two halves, with longevity swaps and small to mid-sized bulk annuity transactions dominating the first half and a surge in bulk annuity deals over the second half, including the Mercer-led £2.2bn Metal Box buy out which looks set to be the largest transaction of the year.
“The big winners have been those well-prepared schemes that came to market early with clear pricing targets and condensed broking processes,” he added.
“We are delighted to have advised on around one in four of the overall deals in 2021 and, in each case, helped clients to achieve their desired objectives. Despite the continued challenges for many from the evolving COVID-19 pandemic, the primary driver remains to obtain protection against uncontrolled risk.”
