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11

Retirement reforms spur buy-in/buy-out activity

Open-access content Monday 10th November 2014 — updated 5.13pm, Wednesday 29th April 2020

Chancellor George Osborne’s decision in this year’s Budget to scrap compulsory annuities has helped drive buy-in and buy-out activity to a record level, according to LCP.

Its report on the insurance de-risking market expects the value of buy-ins and buy-outs written in 2014 to pass £10bn for the first time ever.

Looking ahead to 2015, there are signs that record insurer capacity and continued competitive pricing will ensure that activity matches or even overtakes this year's level, it stated.

LCP partner and co-author of the report Clive Wellsteed said this would be a welcome development for members of defined benefit plans as sponsors and trustees take steps to improve security by moving pension promises away from corporate balance sheets to insurance companie.

'Next year will no doubt be another strong year in the insurance de-risking market,' he said.

'The transactions undertaken by the ICI and Total pension plans demonstrate that larger plans now have a genuine choice of a buy-in or longevity swap. Smaller schemes will benefit from new entrants looking to build their track record and the continued streamlining of terms and process.'

Emma Watkins, LCP partner and co-author of the report, added that the positive outlook was reinforced by strong reinsurer appetite for longevity risk, which is benefiting the pricing of buy-ins, buy-outs and longevity swaps.

This article appeared in our November 2014 issue of The Actuary.
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