Pensions

UK pension buy-ins and buy-outs volume to exceed £30 billion

The volume of pension buy-ins and buy-outs completed by UK pension plans is on course to exceed £30 billion during 2019, according to Lane Clark & Peacock

The volume of pension buy-ins and buy-outs completed by UK pension plans is on course to exceed £30 billion during 2019, according to pension, investment and insurance consultancy Lane Clark & Peacock (LCP).

The firm is predicting that volumes during the first half of the year will top £15 billion, doubling the record volumes of £7.8 billion in H1 2018.

This should put the full-year transaction volumes comfortably on track to beat the £24.2 billion recorded in 2018 and to pass the £30 billion threshold, LCP said.

Analysts believe that increased affordability has been the key driver of the acceleration in activity, with LCP estimating that the buy-out funding position of the average FTSE100 UK pension scheme has improved by around 10% in the past two years.

The high level of de-risking activity in 2018 has carried on at a ferocious rate into 2019, with many companies and trustees exploring buy-in and buy-out opportunities. Stalling life expectancies, good asset performance and competitive pricing between insurers have driven affordability to record levels, said Charlie Finch, Partner at LCP.

Looking ahead, they see no let-up in activity as the market enters a new phase. Their team has never been busier having closed over £8.5bn of deals so far this year and insurers are recruiting heavily into their quotation teams to provide additional capacity, he continued.

Finch said that large transactions by blue-chip companies are driving this new phase as they seek to de-risk their pension liabilities. It is difficult to see this momentum being halted.

LCP itself has been the lead advisor on over £8.5 billion of completed buy-in and buy-out deals this year, more than the total annual volumes for the whole market prior to 2014.

This has included leading transactions for the pension schemes of Commerzbank / Dresdner (£1.2bn full buy-in), Marks and Spencer (£1.4bn of buy-ins) and QinetiQ (£690m buy-in).

Other notable deals in H1 2019 include the £4.6bn partial buy-out by the Rolls-Royce UK Pension Fund with L&G, the largest bulk annuity ever conducted in the UK.

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