A resilient bulk annuity market is now experiencing a resurgence in scheme buyouts.
In this report we provide you with the latest developments in market activity and share our insights to help you approach potential transactions in 2022 and beyond.
A strong market performance
The last couple of years have been challenging for both pension schemes and employers. Yet the pensions de-risking market has continued to perform strongly and demonstrated its resilience throughout this period.
Despite the slow start to 2021, there has recently been a resurgence of activity as schemes and sponsors have focused on their endgame objectives, after weathering the initial impact of the pandemic.
"2021 looks like being a year of two distinct halves. The second half of the year is proving to be much busier, with a marked increase in the level of new business approaching the market and being written."
Key findings
Total buy-in and buyout volumes in 2020 - the second highest on record, despite the onset of the pandemic in the first quarter
Value of buy-ins and buyouts completed in the first half of 2021 – a slow start to the year and less than originally expected.
Total projected market volumes for 2021, which is due to a marked increase in the level of new business during second half of the year.
Estimated average time for UK DB pensions schemes (FTSE350 companies) to be able to buy out their liabilities.
The outlook for 2022 and beyond
The relatively slow start to 2021 means there is potential for a number of insurers not to have satisfied their aspirations from the beginning of the year. This could lead to some heightened appetite amongst these insurers going into 2022.
". . . the pipeline of business for 2022 from schemes seeking to insure their liabilities already looks very healthy."
Keeping one eye on the wind-up prize
Whilst it is important for trustees and sponsors to focus on DB endgame strategy and the journey plan, we believe it is also useful to step back and consider the ultimate aim. For many schemes this will involve wind-up.
There is no one-size fits all here. Each scheme has a unique history and a unique risk profile. And scheme stakeholders will have different views on managing these risks.
"One thing is clear though. It isn’t all about the endgame transaction — you should keep one eye on the real endgame of scheme wind-up to help you navigate these issues."
Please contact Gavin Markham or Rosie Fantom if you would like to discuss
any of the topics in more detail.
More on the DB pensions endgame journey
Bulk annuities: focusing on longevity
Read the second part our 2022 bulk annuities market report. Understand how longevity and mortality assumptions might affect DB pension schemes and bulk annuity pricing.
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DB Navigator interactive framework
Our holistic actuarial, investment and pension administration approach gives you the knowledge, structure and tools to optimise your strategy for tackling the journey towards your DB endgame.
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