Transforming Bulk Annuity Market Amid Pension Scheme Engagement
The bulk annuity market is poised for transformation as larger pension schemes increasingly engage with the insurance sector, according to Standard Life. Current market trends reveal that smaller defined benefit (DB) schemes continue to drive buy-ins, despite a high transaction rate and a slight decline in total deal volume. This shift indicates a growing focus on smaller schemes.
Claire Altman, managing director for pensions risk transfer and individual retirement at Standard Life, highlighted the potential impact of larger schemes on insurer capacity and pricing structures. She noted, “The return of larger schemes has the potential to play a role in shaping insurer capacity and pricing.”
Standard Life forecasts that the bulk annuity volume will reach between £35 billion and £40 billion by 2026. This projection occurs amid a diversified approach by DB schemes, with some ready for deals while others reassess options due to capabilities introduced by the Pension Schemes Act. Altman emphasized the lack of clarity regarding the application of certain options, particularly concerning surplus capital.
The government's plan to review flexible apportionment arrangements following the Aberdeen-Stagecoach deal might enhance established routes like buy-ins and buyouts. Altman observed that the decision of pension schemes to either proceed with transactions or await regulatory clarity will significantly influence the bulk annuity market's trajectory in the latter half of the year.
Meanwhile, in recent weeks, several transactions for smaller schemes have been completed successfully. Aviva insured the Stantec Pension Plan through a buy-in for 680 members, finalizing a deal for a scheme with £152 million in assets and a surplus exceeding £30 million. Led by James Duggan of Vidett, the trustees prioritized member experience in choosing Aviva as the insurer.
Additionally, Aviva, in collaboration with Broadstone, finalized a £5 million buy-in for STS Field Grant Limited Pension Scheme, sponsored by Key Technologies, covering 48 members. Paul Donnelly of Aviva commented, “This transaction demonstrates that schemes of all sizes can successfully access the bulk annuity market and achieve a positive outcome for their members.”
Furthermore, Just Group completed an £11 million buy-in for the Chartered Institute of Procurement and Supply Pension Scheme, in partnership with K3 Advisory. Richard Williams, professional trustee at Capital Cranfield, lauded the cooperation between trustees and advisers, emphasizing its role in securing members' benefits effectively even in a dynamic market.