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LCP predicts that
annual volumes of £30 billion will be the ‘new normal’ in the buy-in and buy-out market

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Recent findings from pensions consultancy Lane Clark and Peacock (“LCP”) suggest that insurance capacity is likely to be able to accommodate £30 billion of future annual volumes at attractive pricing levels for pension schemes, with the ability to flex up to £40 billion as required.

Recent survey findings indicate that next year will see continued demand for buy-ins and buy-outs as more defined benefit pension schemes reach maturity and insurer appetite remains high.

Other predictions by LCP for 2020 and beyond include:

  •  A higher number of smaller transactions is expected in 2020. In 2019, more than 75% of total volumes was accounted for by 11 transactions. Next year there is expected to be around 10 transactions covering a total of £15billion, leaving more capacity for buy-outs and buy-ins covering liabilities in the range of £250 million and £1 billion.
  • Over the next 15 years, almost £800 billion of liabilities are expected to line-up for transfer to the insurance market.
  • Momentum in the longevity swap market will continue into 2020. Volumes could reach £15 billion before the end of 2019 and between £10 billion and £15 billion is projected for next year.

During a survey in a recent webinar conducted by LCP, 57% of attendees said that the long-term objective for their pension scheme is to buy out with an insurer. This compares with 40% of respondents to the same question when asked last year.

Myles Pink, Partner at LCP, commented:

“2019 was a record-breaking year not only in volume, but also in the execution of 11 transactions covering in excess of £1 billion of liabilities. We expect 2020 to see a greater mix of transactions, with fewer high-profile deals and an opportunity for smaller transactions to complete.”

“Insurance appetite looks strong in the mid-term, and annual volumes of £30 billion in the de-risking market could be the new normal for the market. Demand will remain high as more pension schemes approach maturity and are successful in reaching their long-term funding target.”

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