Investment - Articles - Hymans Robertson comments on Lehmans buy-out with Rothesay

 “This is the biggest bulk annuity deal of 2015 so far. It’s a well-timed transaction given Solvency II comes into effect at the start of 2016 which is likely to push up the cost of bulk annuities for deferred members. Under the new regime insuring younger members of pension schemes will be considered a greater risk. This will require more capital to be set aside, putting upward pressure on pricing for buy-ins and buy-outs involving younger deferred members.

 “This deal demonstrates Rothesay Life’s ability to price full buy-outs keenly having transacted six of the ten large buy-out deals of the last few years.

 “Looking ahead, in the short to medium terms, we believe the market will continue to be dominated by deals where gilts are exchanged for buy-ins. The pricing on these still looks very attractive. For many defined benefit pension schemes the ultimate end game is to undertake a full buy-out. While a transaction such as the one Lehmans has competed today will be a few years off for most, a buy-in, which is a bulk annuity purchased by trustees as a special matching asset, is an excellent and popular first step, which is very affordable today.”