The UK's bulk annuity market has completed £30bn worth of pension buy-ins and buyouts this year, and the picture is likely to be very similar in 2021, according to Willis Towers Watson (WTW).
The longevity swap market has also been very busy this year, with over £24bn of deals completed, despite the disruption brought on by COVID-19.
Overall, WTW said that 2020 may just pip 2019 as the biggest year ever in the longevity de-risking markets, with combined transaction values similar to last year’s record-breaking £56bn of liabilities transferred.
The insurance firm expects another £30bn of buy-ins and buyouts next year, along with £25bn of longevity swaps to be completed.
Shelly Beard, senior director in WTW’s transactions team, said that this year's activity highlights the strength of the longevity de-risking market, and the focus that trustees and sponsors have shown to do the right thing for members.
“A few years ago, many were predicting exponential growth in this market, whereas 2019 to 2021 will all have very similar new business volumes,” she continued.
“This reflects general falls in scheme funding levels over 2020 as well as the many other priorities trustees have to focus on this year and next – most notably GMP equalisation.”
This year approximately 150 deals are expected to contribute to the total of £30bn for buyouts and buy-ins. WTW said that a decrease in multi-billion-pound deals allowed improved market capacity and access for smaller pension schemes, which have struggled to get traction in the recent past.
As has been the case in 2020, the company expects 2021 to present opportunities for all sizes of pension scheme, with next year also likely to see the first deals for superfunds.
“Our clients recognise that future prospects for longevity are more uncertain now than at perhaps any time in recent memory,” Beard said. “This means that, where it is affordable to so, transferring risk to the insurance market is the prudent thing to do.
“The key thing for schemes going into 2021 with de-risking ambitions is to stay agile on the timing of any deal. It seems likely that 2021 will be another year of uncertainty and this may present opportunities for well prepared and flexible schemes.”
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Author: Chris Seekings
