8 January 2016
In our annual pensions de-risking report published on 2 December, we reported that volumes had reached £10bn – the second largest year on record after 2014. Activity since then – including some significant-sized transactions such as the £300m full buy-out by the TKM Group Pension Scheme with Aviva – means that total volumes for the year will now exceed £11bn.
The final quarter also saw the largest medically-underwritten buy-in to date at £230m by L&G in December. With medical underwriting specialist Just Retirement reporting £270m in October alone, we anticipate that medically underwritten buy-in volumes in 2015 will comfortably exceed the previous high of £0.7bn set in 2014.
Commenting on the activity, Charlie Finch, partner at LCP said: “As we go into 2016, the fundamentals of the market are strong. The outlook for pensioner buy-ins, where pricing remains competitive in the new Solvency II regime, is particularly positive.
“Pension plans considering a full buy-out including deferreds will find that Solvency II presents more challenges around transaction structure and how insurers allocate capital – the prize for getting this right is a more competitive full buy-out price that minimises any Solvency II headwinds.”
Finch continued “Legal & General’s renewed appetite for medically underwritten pensioner buy-ins with a record £230m transaction in December means that competition for such deals should remain strong in 2016 even after the merger of Just Retirement and Partnership that is expected to complete this quarter. We anticipate that medically underwritten pensioner buy-ins will continue to account for up to 10% of total buy-in and buy-out volumes.”