The value of bulk annuity transactions is expected to be about £25 billion for the first half of 2023, according to predictions by Hymans Robertson. With this expected level being at an all-time high schemes will need to embrace change in the way they approach the insurance market, warns the leading pensions and financial services consultancy. It claims there will be a need for a more targeted approach, driven by scheme size.

Lara Desay, Partner and Risk Transfer Specialist, Hymans Robertson, said:

“Busyness in the Risk Transfer market is at an all-time high, with around £25bn of bulk annuity transactions expected to be secured in the first half of 2023. To deal with this level of activity and to enable them to secure a successful transaction, the way in which pension schemes approach the market will have to adapt.

“For small schemes – those below £100m – approaching on an exclusive basis is now becoming a pre-requisite. Setting an appropriate price target relies heavily on having an all-encompassing view of market activity to understand where current market pricing lies and what adjustments are appropriate to reflect a scheme’s profile. Having an adviser with a strong understanding of the current market and knowing who is pricing competitively at any given time is important.

“The segment of the market for medium-sized schemes – between £100m and £1bn – is likely to garner strong interest from a wide range of insurers. A two-round process may still be attractive at this size, but some insurers may prefer this to be reduced to a single round to “cut to the chase" and reduce the burden on their pricing team.

“And the market for large schemes is seeing its largest ever flow of transactions over £1bn in size, around 20 deals at this size have already transacted or, are being quoted on in the market this year. This means securing insurer participation is no longer the given it once was. Key to getting strong participation is having an adviser that is able to demonstrate clarity and certainty over objectives and timescales.

“As with all things pensions related, there is rarely an ‘off the shelf’ solution. Each scheme will have its own nuances and some adjustments to processes may need to be adopted for transactions to be successful. But being willing and alert to making adjustments will be vital.”

Hymans Robertson LLP is a limited liability partnership registered in England and Wales with registered number OC310282. Authorised and regulated by the Financial Conduct Authority and licensed by the Institute and Faculty of Actuaries for a range of investment business activities.