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16 March 2018

2017 was the second busiest year ever
for buy-ins and buy-outs

Analysis by Lane Clark & Peacock (LCP) shows that in 2017 there was £12.3bn of pension buy-ins and buy-outs (also known as bulk annuities) by UK pension plans. This makes 2017 the second busiest year ever, behind 2014 at £13.2bn. 

Pension Insurance Corporation (PIC) wrote the largest volumes in 2017 at £3.7bn (2016: £2.5bn) overtaking Legal & General who wrote £3.4bn (2016:£3.3bn), a 30% and 28% market share respectively. Aviva were the biggest gainers increasing their market share from 6% (£0.6bn) in 2016 to 17% (£2.0bn) in 2017 putting them in third place. 

Buy-in/ buy-out volumes in the UK (£m):

Insurer

H1 2017

H2 2017

Total 2017

2017 share

Total 2016

2016 share (rank)

1.    PIC

1,875

1,825

3,700

30%

2,529

25% (2)

2.    Legal & General1

1,504

1,901

3,405

28%

3,339

33% (1)

3.    Aviva

326

1,719

2,045

17%

620

6% (6)

4.    JUST2

295

703

998

8%

943

9% (5)

5.    Rothesay Life1

405

555

960

8%

6

1<% (8)

6.    Scottish Widows

405

240

645

5%

1,475

14% (3)

7.    Canada Life

276

268

544

4%

128

1% (7)

8.    Phoenix Life

0

0

0

0%

1,181

12% (4)

       Total

5,086

7,211

12,297

100%

10,221

100%

Source: Insurance company data. See notes to editors for further details.

LCP’s analysis of insurer data for 2017 reveals:

  • Total longevity risk transfer in 2017 reached £18.7bn, including £6.4bn of longevity swaps across five transactions.
  • The buy-in and buy-out volumes in 2017 were achieved despite the largest amount insured by a single scheme being limited to £1.2bn. This was due to a record number of mid-sized buy-ins and buy-outs over £100m in 2017 (34 confirmed to date), reflecting the extremely high-level of activity (the next highest is 24 buy-ins and buy-outs over £100m in 2016).
  • The largest amount insured by a single scheme in 2017 was £1.2bn by the Pearson Pension Plan, split across two buy-ins with Aviva and Legal & General. The largest transaction by a single insurer was the £725m full buy-in by The Former Registered Dock Workers Pension Fund with PIC.
  • There were no annuity “back-book” transactions in 2017. However, Prudential announced this week that they are transferring a record £12bn of their annuity portfolio to Rothesay Life and last month, Phoenix Life announced it is purchasing the Standard Life insurance business including its historic annuity portfolios.

Buy-ins and buy-outs since 2007 split by half year.

Charlie Finch, partner at LCP commented:

“2017 has seen a continued acceleration of de-risking activity by pension plans as they progress on their journey plans and funding positions improve. We expect to see a pick-up in full buy-outs in 2018 on the back of improved affordability.  This is down to a combination of buoyant investment markets, strong price competition between insurers and continued evidence of reduced life expectancies.”

“Insurers are now widely pricing in the reduced life expectancies evidenced by the CMI 2016 mortality projections published last year, which is feeding into attractive pricing. The CMI 2017 mortality projections released earlier this month show a further reduction in life expectancies.”

“2018 has got off to a busy start with significant annuity back-books taken on by Rothesay Life and Phoenix Life. Insurers are reporting that they are busier than ever, with a number of £1bn plus transactions set to close over the coming months.  We continue to anticipate record buy-in and buy-out volumes in 2018 of over £15bn.  Combined with future back-book transactions this could lead to significant capacity crunches at times during the year.  Schemes should consider carefully when to approach to market and be flexible to adapt their timelines to achieve the best possible pricing.” 

-ENDS-

Notes to editors

 1 Only business with a UK pension plan is included.  The table therefore excludes the £3bn transfer of annuities from Aegon to L&G in May 2016, and the £6bn transfer of annuities from Aegon to Rothesay Life in April 2016.

2 Just Retirement and Partnership merged on 4 April 2016 to form JUST.  Their business volumes prior to the merger has been combined.

Further data and statistics

Buy-ins and buy-outs over £100m in 2017 (£m)

Name

Size £m

Insurer

Type of transaction

Date

LCP lead adviser

The Former Registered Dockworkers Pension Fund

725

PIC

Full buy-out

Oct-17

Undisclosed

690

PIC

Pensioner buy-in

Jun-17

 

The Pearson Plan

600

Legal & General

Pensioner buy-in

Oct -17

The Pearson Plan

600

Aviva

Pensioner buy-in

Oct-17

Wolseley Group

590

PIC

Pensioner buy-in

Jun-17

 

Plumbing & Mechanical Services (UK) Industry

570

Legal & General

Pensioner buy-in

Jun-17

MNOPF

490

Legal & General

Pensioner buy-in

Nov-17

 

Post Office

450

Rothesay Life

Full buy-in

Jul-17

Undisclosed

380

Aviva

Pensioner buy-in

Dec-17

 

Tullett Prebon

270

Rothesay Life

Full buy-out

May-17

 

Undisclosed

270

Legal & General

Pensioner buy-in

Jun-17

 

Undisclosed

260

Scottish Widows

Pensioner buy-in

Mar-17

Cancer Research

250

Canada Life

Pensioner buy-in

Mar-17

Undisclosed

250

Legal & General

Pensioner buy-in

Oct-17

 

Undisclosed

250

Legal & General

Full buy-out

Nov-17

Undisclosed

245

JUST

Pensioner buy-in

Sep-17

Smiths Group

210

Canada Life

Pensioner buy-in

Q3-2017

 

3i

200

PIC

Pensioner buy-in

Mar-17

Undisclosed

200

PIC

Pensioner buy-in

Jul-17

 

Undisclosed

200

PIC

Pensioner buy-in

Nov-17

Sea Containers

180

Aviva

Full buy-out

Aug-17

 

Undisclosed

180

Aviva

Pensioner buy-in

Dec-17

 

TI Group

140

PIC

Pensioner buy-in

Jan-17

 

Undisclosed

130

Legal & General

Full buy-out

Jun-17

 

Undisclosed

130

Aviva

Full buy-out

Dec-17

 

Undisclosed

125

JUST

Pensioner buy-in

Mar-17

 

Undisclosed

120

Scottish Widows

Pensioner buy-in

Oct-17

Undisclosed

115

Legal & General

Pensioner buy-in

Jun-17

 

Undisclosed

105

Rothesay Life

Full buy-out

Q4-2017

 

Pharmacia

100

Scottish Widows

Pensioner buy-in

Mar-17

 

Undisclosed

100

Aviva

Full buy-out

Apr-17

 

Undisclosed

100

Pension Insurance Corporation

Pensioner buy-in

Jul-17

 

Undisclosed

100

Aviva

Full buy-out

Nov-17

Undisclosed

100

Legal & General

Full buy-out

Dec-17

 

Source: Insurance company data for 2017 and public announcements. Just and PIC are yet to confirm the final breakdown of business volumes for H2 2017.

Further details of previous years can be found in LCP’s De-risking Report 2018, “Buy-ins, buy-outs and longevity swaps”, available at www.lcp.uk.com/deriskingreport.