Pension Risk Transfer Market Shifts: Insights from Industry Experts

The pension risk transfer market is undergoing significant shifts, as highlighted in a recent roundtable organized by Pension Insurance Corporation (PIC). Chaired by Jonathan Stapleton, editor of Professional Pensions, the event gathered industry experts to discuss strategic positioning and expected developments, particularly looking towards 2026.

Strategic Focus and Market Growth

Tristan Walker-Buckton, Co-head of Origination at PIC, emphasized a growing focus on enhancing member experience and customer service. This strategic shift is enabled by improved financial positions, granting trustees more flexibility in decision-making. PIC's focus has bolstered its success in transactions, including a significant deal with Rolls-Royce. The bulk annuity market is expected to expand dramatically, with projections suggesting it could reach a valuation between £40 billion and £60 billion by 2025, driven by elevated gilt yields and substantial transactions on the horizon for 2026.

Investment Dynamics and Competitive Pricing

The market is seeing increased investment and capital inflow, highlighted by PIC's acquisition by Athora and new entrants like Brookfield. Louise Nash from PIC noted this underscores the market's capacity to meet the evolving needs of defined benefit schemes. Competitive pricing is a prevailing trend, with smaller schemes benefiting from a wider range of pricing options due to heightened competition among insurers. Alan Greenlees of Zedra pointed out that schemes now focus on suitability over mere affordability.

Administrative Efficiency and Regulatory Challenges

Transaction administration efficiency is crucial, as administrators tackle data cleansing, member requests, and regulatory compliance requirements like GMP equalization. Paul Barrett from PIC highlighted their collaboration with third-party administrators to optimize these processes. Despite challenges in rectifying administrative issues and managing sponsors' expectations, Tiziana Perrella of Dalriada Trustees affirmed the market's forward momentum in securing buyouts.

Strategic Planning and Market Competition

Tim Giles of IGG emphasized that well-funded schemes are adopting a more deliberate approach, opting for careful transition to insurance rather than immediate transactions. Lisa Purdy of Capital Cranfield stressed the importance of maintaining administrative efficiency to mitigate ongoing scheme costs. Mark Latimour of Eversheds Sutherland noted the competitive nature of smaller scheme markets, with larger insurers entering this space and standardizing terms to increase competition.

Overcoming challenges requires stakeholders to articulate clear objectives and foster strong collaborations with insurers to ensure optimal outcomes. The roundtable concluded with consensus on the need for strategic planning, efficient administration, and a strong focus on member outcomes. As Louise Nash emphasized, a partnership approach between insurers and trustees, grounded in mutual goals, remains vital for achieving favorable results in the evolving pension risk transfer market.