Stuart O’Brien, Partner at Sackers, commented: “Over the past four years the industry has seen an unprecedented increase in buy-in and buy-out activity, something our own experience supports. In the past 18 months, we have advised trustees and employers on transactions with every major insurer quoting for business during that period, amounting to over 20% of the market’s activity - with a combined deal volume of around £2.4bn in 2017 alone. With pension schemes increasingly exploring how they can best manage or transfer the risks associated with their DB pension arrangements to an insurance company in order to achieve sustainability and safeguard benefits, the number of buy-ins and buy-outs look set to continue to grow considerably.
“Factors such as the level of competition in the market, the focus on pension plan funding and market pricing being at attractive levels are all key contributors to what could be the biggest year yet for that the bulk annuity market. There are now eight insurers actively quoting for new business and an estimated capacity of over £25bn.”
O’Brien added: “There are many pitfalls to avoid, but also many favourable terms to capitalise on and many benefits to be had for schemes covering the pensioner and deferred member spectrum - not least removing the risks from the scheme and sponsor around longevity, interest rates and inflation. It’s a solid solution for many schemes but, like anything else, preparation is key and shouldn’t just start when a transaction is in the offing - for those relevant schemes getting ‘buy in ready’ will be key to a successful outcome. It will also be important to ensure they have the right advisors who are experienced in these transactions and the work involved to ensure a smooth process through to completion.”
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