Full steam ahead for UK de-risking market

The bulk annuity and longevity swap UK markets are thriving and seem set to continue in this way as schemes progress toward their chosen end-game.

Over recent years, perhaps unsurprisingly, there has been a trend toward full scheme buy-ins leading to buyouts. This trajectory looks set to continue as many plan sponsors are finding that buyout is now within an affordable range.

Improved funding positions following a significant increase in Gilt yields, along with some of the cheapest pricing seen in over a decade, mean that 2023 could see the highest volume of deals ever recorded.

With the first superfund – Clara Pensions – receiving approval from The Pensions Regulator in late 2021, it is also likely that the first superfund transaction is soon to be completed. There has been a lot of time to build pipelines over the last few years and there are a number of schemes well positioned to move quickly this year.

There are now several insurers that have grown their asset base, reinsurance capabilities and capital sourcing ability to the point that even larger deals are possible and more mega transactions are certainly expected in the next couple of years.

However, as a result of lower scheme liabilities overall, this year is likely to see a higher volume of deals but lower average liability values being de-risked, compared with previous years.

Even for schemes where a transaction is not yet quite within reach, it looks like trustees are monitoring their position more closely. Several are being more proactive in using various monitoring services to keep an eye on their funding levels and the amount of available assets and current bulk annuity pricing.

Our special report in this issue about UK risk transfer provides further in-depth information on this subject.

Venilia Amorim, Editor, IPE.com
venilia.amorim@ipe.com