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The Actuary The magazine of the Institute & Faculty of Actuaries

UK bulk annuity sales top £900m in second quarter

A total of £914m worth of bulk annuity deals were completed in the UK in a ‘relatively solid’ second quarter of 2012, Aon Hewitt said today.

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The figure, published in the firm’s latest UK bulk annuity quarterly survey, is almost double that recorded in the first three months of the year, where the total value of annuity deals concluded between pension schemes and insurers was £491m.

The total number of bulk annuity cases written also increased, up from 27 the previous quarter to 45.

There were no especially large bulk annuity deals written in the second quarter, but the two largest deals finalised were both buy-ins. These included the West Midlands Integrated Transport Authority finalising a £272m pensioner buy-in with Prudential and Gartmore concluding a full buy-in of all its scheme liabilities, worth £160m, with Pension Insurance Corporation.

‘The market’s focus continued to be on pensioner buy-in opportunities, with full buy-ins (with the exception of Gartmore) and buyouts being unachievable for most schemes given the low level of bond yields and consequently high deficits,’ Aon Hewitt said.

‘Pricing opportunities continue to be available for schemes holding gilts,’ it added. ‘The opportunity to swap gilts for a pensioner buy-in which provides a higher return as well as a longevity hedge continued over the quarter.’

In total, PIC wrote the biggest share of bulk annuity deals in the second quarter, with its five cases amounting to £408m, or 44% of the share of the market over the three month period.

Smaller deals were also completed by MetLife, Aviva, L&G and Canada Life, while the Prudential’s deal with the WMITA amounted to 30% of the quarter’s market share.

Aon Hewitt also highlighted the £1.4bn longevity swap completed by Akzo Nobel during the quarter.

Moving forward, pipeline activity is ‘buoyant’ in terms of quotations being sought by pension schemes.