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A resurgent second half in
2021 drives another strong year for UK pension risk transfer

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Analysis of insurers’ 2021 results by Lane Clark & Peacock (LCP) shows that, despite a relatively muted start to the year, the UK pension risk transfer market grew strongly in the second half of the year to reach £43.9bn across buy-ins, buy-outs, APPs and longevity swaps. This compares to £55.8bn in 2020.

For buy-in and buy-outs in isolation, volumes reached £27.7bn in 2021, with £20bn of transactions completing in the second half of the year.  This compares to £31.3bn in 2020.

LCP’s analysis is based on the insurers’ final reported results for 2021, including Rothesay’s results released today.  Key findings include:

  • Competition for buy-ins and buy-outs has increased with five insurers securing a 10%+ market share in 2021, up from four in 2020 and three in 2019.  The five were Aviva, Legal and General (L&G), PIC, Rothesay and Standard Life each with £3bn or more of buy-ins/outs in 2021.
  • For the first year ever, Aviva wrote the highest buy-in/out volumes with £6.2bn (22% market share). Standard Life (part of Phoenix Group) also had a record year with their volumes more than doubling to £5.5bn (20% market share). They were followed by L&G on £5.3bn[1] (19%), PIC on £4.7bn (17%) and Rothesay on £3.0bn (11%) – the three insurers that have historically dominated the market.  Full figures are set out at the end of the release.
  • The largest single buy-in/out in 2021 was the £2.2bn full buy-in of the Metal Box Pension Scheme completed by PIC in October. The next two largest transactions were both completed by Standard Life: a £1.8bn pension buy-in with the Imperial Tobacco scheme and a £1.7bn full buy-in with the Gallaher scheme.
  • 2021 saw a continued shift towards mid-sized buy-ins/outs.  Buy-ins/outs between £100m and £1bn have trebled since 2015 and now amount to over 33% of all deals.  This was at the expense of smaller deals (below £100m) where deal numbers fell by a third over the same period. Only four buy-in/outs over £1bn completed in 2021, compared to seven in 2020 and 10 in 2019. 
  • 2021 saw a further increase in full scheme transactions as affordability improved with rising scheme funding levels and insurers increasingly able to offer attractive pricing for non-pensioners.  Two thirds of transaction volumes in 2021 included deferred members, compared to only a quarter five years ago.
  • Four longevity swaps were announced by UK schemes in 2021 totalling £15.3bn (FY 2020: six longevity swaps totalling £24.1bn) with a diverse range of intermediation approaches for accessing the reinsurance markets. A further £5.5bn longevity swap for the Lloyds Bank scheme was announced in early 2022. 
  • In June 2021 L&G completed a £0.9bn Assured Payment Policy (APP) with its own scheme, the third such transaction of its kind. Meanwhile, in November 2021, Clara-Pensions completed the superfund assessment process with The Pensions Regulator, paving the way for the first schemes to transfer to a superfund in 2022.

Full data is set out in the notes to editors section below.

Imogen Cothay, Partner at LCP, commented: “The Covid-19 pandemic led to a relatively muted start for the buy-in/out market in 2021 but activity surged later in the year with almost half of the whole year’s £28bn of business closing in the final quarter.  The past couple of years has been driven by mid-sized pension schemes with fewer “mega transactions” above £1bn.  However, we are seeing plenty of interest from large schemes and as they take de-risking steps that will drive volumes to new heights.”

Charlie Finch, partner at LCP, added: “Looking ahead, turbulence in markets as global events unfold could lead to buy-in pricing opportunities, similar to the market dislocations in early 2020 driven by the Covid-19 pandemic. We’ve been working with schemes to design practical flightpaths and put processes in place to capitalise on short-lived buy-in pricing opportunities that help them towards their long-term destination.

“Insurer competition is at its most intense in a decade with five insurers vying for top spot last year. Pricing is proving highly attractive as insurers hunt market share, helped by the rising yields on credit. The positive noises on reform to Solvency II is also welcome news for insurers and is likely to lead to greater insurer capacity for schemes looking to de-risk through buy-ins and buy-outs.”

-ENDS-

Notes to editors:
[1] L&G also wrote a £925m Assured Payment Policy (APP) in 2021. APPs are recognised in the volume figures if they are subsequently converted into buy-ins. 

For further detail on how reforms to the Solvency II regime could impact the buy-out market, see our press release from February 2022:  https://www.lcp.uk.com/media-centre/2022/02/reform-of-solvency-requirements-on-insurers-could-have-significant-impact-on-pension-buy-out-market/

Over 2021 and 2022 to date, LCP has been lead adviser on over £4.5bn of buy-ins and buy-outs across 24 transactions.  This includes transactions for Heathrow Airport, Commonwealth Bank of Australia, Northern Bank, QinetiQ and TUI.





Previous data can be found in LCP’s De-risking Report 2021, “Finding a safe landing”.