This could be a record year for bulk annuity and longevity swap transactions in the U.K., according to advisory firm WTW. The firm expects these transactions to reach 80 billion pounds ($101.36 billion) this year, with 60 billion pounds in bulk annuity transactions and 20 billion pounds in longevity swaps—what WTW says could be the biggest year on record for pension de-risking.
In 2021, bulk annuity and longevity swap transactions exceeded 40 billion pounds. These transactions increased to 60 billion pounds in 2023, when the number of pension schemes engaging in an insurance-led buyout was historically high.
According to WTW, the significant increase in the funded status of U.K. pension schemes .
“It’s clear that funding improvements have turbo-charged the pensions de-risking market and, from a capacity perspective, we have already seen that the insurance market is capable of scaling up to meet demand,” Jenny Neale, a director on WTW’s pension transactions team, in a statement.
The increase in U.K. pension risk transfer transactions led Fitch Ratings earlier this year to label the U.K. life insurance industry as “improving” due to an increase in funded status and pension risk transfer transactions, the only country or region in Europe to receive that label.
Among other trends for the U.K. pension de-risking market this year, WTW predicted that trustees selecting an insurer are likely to prioritize factors other than price, such as brand reputation, member experience and financial strength.
According to WTW, there are transaction opportunities for pension schemes of all sizes, although it expects to see more multi-billion-pound transactions among larger pensions.
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Tags: insurance, pension risk transfers, WTW