Season 4 Episode 11:
The DB Pensions Buy-out Boom
25 January 2023
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This week we’re discussing a particularly booming area of the markets in 2023: the market for buy-outs of DB pension funds by insurers. We’re speaking to LCP’s Catherine Hopper who thinks that 2023 will see record volumes in the “bulk annuity” market.
We discuss the key changes in the funded status of UK DB schemes over the last year and what this has meant for their buy-out deficit and we also cover the supply/demand dynamic in the market and what this means for trustees looking to do a transaction for their scheme. We also discuss the implications of potential future changes, such as solvency II regulation and the potential entry of new participants into the market.
We think anyone involved in DB pensions will find this a worthwhile listen on one of the big themes of the moment.
LCP’s report - Insurance enters a new phase: a skyrocketing market
- Headlines from the latest de-risking report, why the team put this report together, what’s changed over time and what this report is telling us
- What surprised Catherine most in the data
- Key takeaways:
- Funding levels, scheme sizes and what this means for market volumes
- How expected volumes compare to market capacity and what specifically is driving market capacity
- How the supply/demand imbalance could play out and what this means for pension schemes
- We discuss the nuance of partial buy-ins vs full buy-outs and how this balance might now change
- For those targeting a transaction, what do insurers want to see?
- Investment – how do insurers invest and advice on investing in the run-up to transaction (months/years before)
- Mooted changes to solvency regulations and what this could mean for pricing and capacity
- The prediction of a potential new entrant into the market
- Innovations taking place on the insurer side to facilitate transactions
What’s one thing you would like listeners to take away from this:
Doing a buy-out isn’t run of the mill for pension schemes, so a strategic de-risking adviser can add a lot of value to help prioritise time and costs and achieve a lower price.
What is the most underappreciated thing?
Keeping it simple. You may think that complexity means doing things better, but that is not always the case, it can make things harder to monitor.
Any recommendations for good books or podcasts:
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