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LCP completes
£1bn of small scheme buy-ins and buy-outs

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Evidence suggests smaller schemes are being increasingly crowded out of the market, but LCP is seeing unprecedent demand for its streamlined buy-in and buy-out service.

LCP has this week completed its 40th transaction using the streamlined buy-in and buy-out service with over £1bn of transactions for smaller schemes completed through the service to date. LCP were the first consultancy to introduce a streamlined service using pre-negotiated insurance contracts and partnering with a legal firm. Swedish Match completed the first such streamlined transaction in the UK in 2011.

With buy-in and buy-out volumes expected to reach £35bn for 2019 after hitting record levels in H1 2019 (£17.6bn), there has been growing concern that insurers will focus their attention on larger transactions at the expense of smaller schemes. The evidence appears to support this as the number of buy-ins and buy-outs under £100m have reduced by around 30% over the last 5 years (based on data to H1 2019).

This is one of the reasons why LCP believes there has been a huge rise in demand from smaller schemes for LCP’s streamlined service. Going forward LCP expects that it will increasingly be the norm for any transaction under £100m to operate through a streamlined process. Some insurers are already asking for the streamlined approach to be adopted for transactions as large as £200m.

David Stewart, Partner in LCP’s de-risking practice, commented:

“The logic for buy-ins and buy-outs is arguably strongest for smaller schemes as they do not benefit from the scale of larger schemes. It is therefore disappointing that the last five years has seen the number of transactions under £100m fall by 30%, although this is perhaps no surprise given how busy the buy-out market is.

“We are pleased to have been able to buck this trend having seen a huge rise in demand from smaller schemes to transact through our streamlined service. The number of transactions through the service has increased 50% in the past 5 years. We are delighted to have now completed over £1bn through LCP’s streamlined service providing these schemes with access to pricing just as attractive as that being achieved by larger schemes.

“Streamlined buy-in/out services are rapidly becoming the norm for transactions under £100m. I would encourage all small schemes to consider a streamlined buy-in/out service as it provides access to the favourable pricing and terms that is proving so attractive to larger schemes.”

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