In its first Bulk Annuity Market Update, Scottish Widows reports that it implemented three pensioner buy-ins in the first half of the year, ranging from £54m to £630m, with a total premium of £885m. Although uncertainties remain post the EU referendum and market conditions continue to be volatile, the company says that demand is strong and that opportunities will remain for pension schemes that are well prepared.
One interesting theme over this period, it reports, has been the number of schemes adopting a ‘phased buy-in’ de-risking strategy, which can be effective for schemes of all sizes. The strategy can deliver financial and operational benefits for schemes and it expects this approach of adding further liabilities to existing buy-ins to become more common in the market.
Reported volumes for the first half of 2016 of £2.7bn were lower than the £4.4bn written in the same period in 2015, but Scottish Widows says that much of this reduction can be attributed to the following:
• The drive to complete transactions ahead of Solvency II implementation, which resulted in a bumper Q4 2015 leaving pipelines lower entering 2016; and
• Fewer large transactions, with only two above £500m (including Scottish Widows’ own £630m buy-in with the ICI Pension Fund) being completed compared with five in the first half of 2015.
Emma Watkins, Director of Bulk Annuities at Scottish Widows, says: "Market conditions have been volatile this year, creating both challenges and opportunities for pension schemes. Lower for longer interest rates will dominate pricing going forwards, particularly for deferreds, but we are continuing to see a high level of demand for de-risking through buy-ins and buy-outs and well prepared schemes with defined objectives will be able to take advantage of pricing opportunities that arise."
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