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The Actuary The magazine of the Institute & Faculty of Actuaries

Record-breaking £25bn of pension liabilities transferred to insurers

More than £25bn of pension scheme liabilities have been transferred to insurers through eight ‘jumbo’ transactions in the UK so far this year, analysis by Aon has found.

Buyout value on the rise ©iStock
Buyout value on the rise ©iStock

This already exceeds the previous annual record of £24.2bn set for the bulk annuity market in 2018 through 160 transactions, with further large deals expected this year.

A number of records have already been set in 2019, with Rothesay Life’s £4.7bn buyout of the telent pension scheme in September the largest transaction ever seen in the UK.

Meanwhile, the National Grid UK Pension Scheme became the largest scheme to use buy-ins to manage risk earlier this year.

“These transactions demonstrate the growing scope in the market for large pension schemes to implement bespoke de-risking solutions,” said Aon partner, Mike Edwards.

“We have observed a significant shift in 2019, with the market for large transactions increasingly dynamic and schemes needing to be prepared to respond more quickly.”

The top 10 bulk annuity transfers completed in the UK to date are shown below:

Source: Aon
Source: Aon

This comes after analysis from Barnett Waddingham found that more than half of FTSE 100 companies could buyout their defined benefit (DB) pension scheme within 10 years.

Moreover, the consultancy firm calculated that 20% of FTSE 100 firms could be in a position to buyout their DB scheme within five years, and that 55% will be by 2028.

And by diverting an extra 6% of profits into company pensions, it estimated that 70% of FTSE 100 DB schemes could buyout within the next decade.

However, Barnett Waddingham warned that political instability and economic uncertainty could disrupt pension deficits, and that the Pensions Regulator (TPR) is likely to be increasingly interventionist.

“The DB endgame is increasingly a realistic short-term focus for many companies, and the dividend versus deficit contribution balance is a key lever,” partner, Nick Griggs, said.

“Having a robust, coherent plan in place for the DB endgame journey will be the best defence against any intervention from TPR as it will take comfort from the framework that has been put in place."

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