Pensions - Articles - Bulk annuity buy-ins set to skyrocket over next 15 years


A report published by Hymans Robertson reveals that demand for bulk annuity buy-ins is set to skyrocket over the next 15 years and an estimated £700 billion of defined benefit pension scheme liabilities could have been passed to insurance companies by 2032. UK companies are increasingly looking to offload risk from their defined benefit (DB) pension scheme according to the analysis from the leading pension consultancy.

 Hymans Robertson’s annual Risk Transfer Report reveals a growing demand from defined benefit pension schemes to complete buy-ins and buy-outs, with around a third of schemes expected to reach self-sufficiency over the next 15 years. This would imply around £50 billion a year of buy-ins and buy-outs by 2032, compared to current transaction volumes of between £10 billion and £15 billion a year.

 James Mullins, Head of risk transfer buy-out solutions at Hymans Robertson responds to this growing demand: “It is not surprising that more DB schemes are looking to offload risk in the wake of all the challenges surrounding their long-term affordability and sustainability. If demand for buy-ins quadruples, as we predict, this is a phenomenal increase. Pension schemes should be proactive and gradually chip away at the problem through a series of well-timed buy-ins, to take advantage of the high insurer appetite and optimal pricing we’re seeing in the market today.”

 James makes some observations on the year so far: “We have already seen close to £5 billion worth of buy-in and buy-out transactions in the first half of 2017 and we’re expecting transaction values to exceed £10 billion for the third year in a row so, all the signs are pointing towards 2017 being another high-volume year. Despite this, some insurers have completed less bulk annuity business than they had targeted in the first half of 2017, which only serves to increase their appetite to transact over the remainder of the year.”

 James on the need for schemes need to be proactive in the market: “A number of insurers haven’t met their bulk annuity targets for the first half of 2017 and so the willingness to complete buy-ins and buy-outs with pension schemes is currently high. This will not always be the case. As more and more schemes consider insuring their risk, insurers will be increasingly less able to keep up with demand. When this happens they will be more likely to give priority for their best pricing to pension schemes that have already completed a buy-in. This is because those pension schemes have demonstrated they have the knowledge, experience, governance and general readiness to carry out these transactions. So pension schemes who take proactive steps to chip away at the problem by capturing opportunities to complete a series of buy-ins will be in a strong position in years to come.”  

Back to Index


Similar News to this Story

DB pensions consolidation needs to be higher up the agenda
Responding to the Work and Pensions Select Committee’s Inquiry into the DWP’s DB white paper, Susan McIlvogue, Head of Trustee DB, Hymans Robertson, c
Index shows pension schemes hold record surplus
The FAB Index – which provides the aggregate position of the UK’s 6,000 defined benefit (DB) pension schemes calculated using the best estimate expect
Aviva complete bulk annuity deal with Marks and Spencer
Aviva has completed a £925 million bulk purchase annuity transaction with the Trustee of the Marks and Spencer Pension Scheme.

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.