A record breaking year for the bulk annuity market is likely to see transactions reach £35 billion, a 100% increase compared to the average market volumes over the past four years.
According to a report by independent pensions consultancy firm Hymans Robertson, the predicted total volume would be significantly higher than the total of the highest annual volumes written by each insurer over the past four years £22.6 billion.
Following a strong end to 2017 for the bulk annuity market, 2018 has seen an unprecedented number of schemes looking to secure both buy-ins and buy-outs.
The report points to attractive pricing on offer from insurers since the end of 2017 – resulting in schemes exploring the market to take advantage of this pricing – as one of the main drivers for the high activity levels.
An additional driving factor includes schemes de-risking assets following strong equity performance and looking to use these lower risk assets to secure buy-ins.
James Mullins, Partner and Head of Risk Transfer Solutions at Hymans Robertson, explained, “as predicted, 2018 is shaping up to be a remarkable year for the bulk annuity market. Market activity is at a record high with many schemes benefiting from exceptional pricing.”
“For example, on the 6 most recent buy-ins Hymans Robertson have led during 2018 schemes have been able to insure pensioner liabilities at or below their technical provisions reserve.”
Total pension scheme buy-in and buy-out volumes are expected to reach around £18 billion by the end of 2018, far surpassing the previous high of £13.2 billion in 2014.
“The end of the 2018 is shaping up to be very interesting. In the current busy market, insurers have more choice than ever regarding which schemes they wish to engage with and use their best pricing on,” added Mullins.
“This will make it even more important to: have a careful and considered approach; be flexible on when you transact to navigate fluctuations in pricing and competition; and have an advisor who can help guide you through this ever-evolving market.”
“Hymans Robertson’s strong risk transfer experience and deep knowledge of insurers and the market means that we can provide pension schemes with precisely the tools they need in order to best engage the insurance market and get a great outcome for their members.”