24 January 2018
Continuing my annual tradition, I have spent the start of my year reflecting on the last 12 months. I’ve been thinking about how successful (or more realistically, unsuccessful) I have been with the New Year’s resolutions I made last year.
At the start of 2017 I wrote a blog highlighting some key New Year’s resolutions to help you de-risk your pension plan over the year. They included: 1) Confirm your target and agree (or update) your journey plan, 2) Measure the risks you are currently running 3) Prepare to transact. A year later and I still believe these three resolutions are more important than ever before and here are three reasons why.
In our recent report we highlighted that over the last year the average FTSE 100 pension scheme’s buy-out position has increased by 10% and have reached the highest level since before the 2008 banking crisis. More companies than ever before are now within cheque writing distance and are starting on their de-risking journey, with 1 in 5 schemes over 80% funded relative to the cost of full buy-out. This is fantastic news for trustees and sponsors as well as members of these pension schemes. This has consequences for the bulk annuity market.
With this dramatic increase in affordability to de-risk and insurer pricing continuing to be attractive, more and more schemes are thinking about their end goal and how to get there. We are seeing an increase in schemes looking to purchase bulk annuities, whether that’s going straight to a full buy out or opting for a phased de-risking approach. Whilst this is encouraging and exciting for the industry, this increase in demand puts pressure on insurers.
2018 is set to be a busy year for the industry. Some insurers already have a quotation pipeline of over £30bn and the year has only just begun. This is a significant volume for insurers, showing just how high demand is.
Stand out from the crowd
To tackle the increased demand, insurers are beginning to be more selective on which opportunities to target and we believe this will only increase over 2018. No longer are insurers quoting on every potential transaction presented to them. Instead they are selecting the ones they believe have a higher likelihood of transacting, are more straightforward to price or are simply larger (and so more profitable). It is therefore important when approaching insurers for quotations that you go about this very carefully. I believe that my three New Year’s resolutions last year do exactly that, they help you stand out and get noticed.
There will continue to be some very attractive pricing opportunities available in 2018 but schemes will need to stand out in a crowded market if they wish to obtain them. If you want to learn more about how to approach the insurance market at the best time in the best way then speak to one of our experts. They can help you take the right steps to ensure you stand out and get a great deal.
If you want more information, read our de-risking report, summarising 2017 and looking out to 2018.