LCP predicts
buy-in and buy-outs to top £15bn in H1 2019

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  • H1 2019 buy-in and buy-out volumes set to double H1 2018 volumes
  • Full-year transaction volumes on course to pass £30bn threshold
  • LCP lead adviser on £8.5bn+ of completed deals, including Commerzbank, Marks & Spencer and QinetiQ

LCP predicts that volumes of pension buy-ins and buy-outs completed by UK pension plans will top £15 billion for H1 2019, doubling the H1 2018 volumes of £7.8bn, which were a then record. The bumper start puts 2019 on track for exceeding £30bn for the full year, up from £24.2bn in 2018.

Already in 2019, LCP has been lead adviser on over £8.5bn of completed deals – more than the total annual volumes for the whole market prior to 2014. This has included leading transactions for the pension schemes of Commerzbank / Dresdner (£1.2bn full buy-in), Marks and Spencer (£1.4bn of buy-ins) and QinetiQ (£690m buy-in). Other notable deals in H1 2019 include the £4.6bn partial buy-out by the Rolls-Royce UK Pension Fund with L&G, the largest bulk annuity ever conducted in the UK.

Increased affordability has been the key driver of the acceleration in activity. LCP estimates that the buy-out funding position of the average FTSE100 UK pension scheme has improved by around 10% in the past two years, making a transfer of some, or all, of the liabilities to an insurer an increasingly viable option. For the FTSE100 companies alone, LCP projects that around 30 schemes will reach or be close to fully funded on buy-out within the next decade equating to £300bn of pension liabilities.

Commenting, Charlie Finch, Partner at LCP, said:

“The high level of de-risking activity in 2018 has carried on at a ferocious rate into 2019, with many companies and trustees exploring buy-in and buy-out opportunities. Stalling life expectancies, good asset performance and competitive pricing between insurers have driven affordability to record levels.

“Looking ahead, we see no let-up in activity as the market enters a new phase. Our team has never been busier having closed over £8.5bn of deals so far this year and insurers are recruiting heavily into their quotation teams to provide additional capacity. Large transactions by blue-chip companies are driving this new phase as they seek to de-risk their pension liabilities. It is difficult to see this momentum being halted.”

Data on buy-in and buy-out volumes

Source: Insurer data up to 2018. LCP predictions for 2019. Buy-in and buy-out transactions by UK pension schemes only.

Are we at the tipping point?

Are we at the tipping point?

Pensions de-risking report

With the market at a tipping point, the key question is whether pension plan demand could outstrip the available insurance capacity for the first time in 2019.

Download the 2019 report