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New entrants push 2023 buy-in/out volumes to new record of nearly £50bn

Pensions & benefits Pension risk transfer DB pensions

Analysis of insurers’ 2023 results by Lane Clark & Peacock (LCP) shows that the UK pension risk transfer market completed a staggering £49.1bn of buy-ins/outs in 2023, including £0.9bn written by new market entrants M&G and Royal London, eclipsing the previous record set in 2019 of £43.8bn. In addition, £10.3bn of longevity swaps completed, and £0.6bn was transferred to Clara-Pensions in the UK’s first superfund transaction, taking total pension risk transfer over 2023 to £60.0bn.

LCP’s analysis is based on the insurers’ final reported results for 2023, including PIC’s results released today. Full data is set out at the end of the release, but key findings include:

  • 2023 volumes were bolstered by two new entrants to the market: M&G re-entered the market in September, writing £0.6bn in 2023 and a further £0.3bn deal last week; Royal London announced their re-entry earlier this month, having completed two deals for their own schemes: £0.3bn last year and £0.35bn in January this year.
  • These new entrants are in line with LCP’s predictions for last year and this year, and we potentially expect one further entrant this year. Rothesay’s purchase this month of Scottish Widows’ £6bn bulk annuity back book (which remains subject to regulatory approval) means the number of buy-in/out market participants stands at nine insurers (see chart in notes to editors).
  • As forecast in LCP’s May 2023 de-risking update, 2023 saw an unprecedented number of giant transactions. There were 11 buy-ins/outs over £1bn, beating the previous record of nine in 2019, driving the record volumes and making up over half of the £49.1bn total.
  • Individual giant deals also set new records, with the record for largest single buy-in transaction broken by RSA at £6.5bn in February and the record for largest scheme to reach full insurance broken by the British Steel Pension Scheme at £7.5bn in May.
  • Rothesay wrote the largest buy-in/out volumes in 2023 with £12.7bn (26% market share), closely followed by L&G with £12.0bn (24% market share) and then PIC with £6.9bn (14% market share). These insurers wrote the three biggest buy-ins of the year between them: RSA (PIC, £6.5bn), Boots (L&G, £4.7bn) and Co-op (Rothesay, £4.0bn).
  • 2023 also saw a further step change in buy-in/out activity levels, with over 250 transactions completing, a c25% increase on last year (2022: 203) and significantly higher than the c150 pa average in the preceding eight years. This further demonstrates how the market entered a new growth phase in 2022.
  • Due to sustained improvements in buy-out funding, there has been a significant increase in the number of full scheme transactions. Pensioner-only buy-ins, historically the most popular route for schemes starting out on their de-risking journeys, comprised less than 5% of volumes in 2023, down from c75% in 2016.
  • 2023 also heralded a landmark transaction of another type – the UK’s long-awaited first superfund transfer. The £590m Sears Retail Pension Scheme transferred to Clara-Pensions in November 2023. Clara-Pensions agreed a second £600m superfund transaction with the Debenhams Retirement Scheme in March 2024, following Debenham’s insolvency in 2019, and allowing benefits to be restored to full levels.
  • There were also four longevity swaps announced by UK schemes in 2023, totalling £10.3bn (2022: six longevity swaps totalling £16.5bn). The largest longevity swap was £5bn between BT Pension Scheme and Reinsurance Group of America. A £2bn swap between the MMC UK Pension Fund and Munich Re covered active members for the first time.

Charlie Finch, Partner at LCP, commented: “2023 saw several pension risk transfer records surpassed with buy-in/out annual volumes setting a new record of nearly £50bn, as a wave of pension demand crashed across the market driven by improved funding following the LDI crisis. We are pleased to see that all five of our predictions for 2023 came to pass, including the first new entrants in six years. The new insurers have hit the ground running completing five transactions in the past six months and helping push buy-in/out annual volumes to their record level last year.

“2023 was a year of real innovation. Insurers and advisers contended with an unprecedented number of large and complex transactions. We are proud of the part we played in this – leading over 25% of transactions by volume and pioneering solutions to illiquid assets. Last year our Illiquid Assets Solutions Group structured the transfer of over £1bn of property as part of British Steel Pension Scheme’s record £7.5bn of insurance with L&G and designed a multi-prong approach to illiquid assets for RSA’s £6.5bn transaction with PIC. Along with developments in third-party financing, this has really expanded the options available to schemes seeking to de-risk through buy-ins and buy-out.”

Ruth Ward, Principal at LCP, commented: “2024 brings fresh challenges for schemes and insurers alike, with insurers reporting over 20 multi-billion-pound transactions seeking pricing – around double the 11 such transactions completing last year, itself a record. For schemes to stand out from the competition and secure competitive pricing, they must focus on how they present themselves – regardless of size – and a skilled specialist adviser is key to doing that successfully.

“The headlines are dominated by the giant transactions but it’s been really encouraging to see strong insurer participation at the smaller end of the market, with insurers continuing to invest in developing streamlined ways of processing small transactions and we have not (yet) observed any hardening of pricing. We were delighted to help more smaller deals than ever before last year through our streamlined buy-in and buy-out service, completing 17 transactions totalling £1bn in 2023 and bringing the total liabilities insured through this service to over £3.5bn.”


Buy-in/ buy-out volumes in the UK by insurer

Source: Insurance company data. Only buy-ins and buy-outs with a UK pension scheme are included. The data therefore excludes the APP transactions by L&G (£93m in 2022, nil in 2023) and overseas transactions for L&G. Volumes reflect gross premiums before allowance for any liabilities being reinsured. Note the totals may not sum due to rounding.

The chart and table below set out the volume of buy-ins and buy-outs each year since 2007.

Pension buy-in/out market participants

Source: LCP analysis as at March 2024*M&G was formed from the de-merger of Prudential plc in 2019 with the UK insurance business becoming part of M&G plc

Named buy-in/ buy-outs over £100m in 2023/24

Source: Insurance company data for 2023. Public announcements for 2024. Excludes deals where scheme name is not disclosed.

Longevity swaps in 2023/24

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