On the go: UK insurers have collaborated to produce the industry’s first-ever “best practice” guide for schemes preparing for bulk annuity quotations, laying out principles by which trustees, advisers and administrators should abide.
The guide, produced by all eight insurers currently operating in the bulk annuity market — Aviva, Canada Life, Just Group, Legal & General, Pension Insurance Corporation, Rothesay, Scottish Widows and Standard Life — in collaboration with law firm DLA Piper, comes as transaction volumes continue to increase.
More than £200bn has been secured in buy-in and buyout transactions over the past decade. Some £30bn was secured in 2021 alone, and 2022 is forecast to beat that figure, becoming one of the biggest years in the market to date.
The demand is largely driven by improved defined benefit scheme funding levels and approaching endgame objectives.
The new guide, which sets out principles applying to transactions of all sizes, is intended to create greater efficiency in the market, and lists a number of key considerations accompanied by detailed recommendations.
The guide stresses the importance of communication, and encourages a holistic approach to data. It encourages pre-emptive work on residual risks and gathering full asset data.
It provides a number of recommendations, breaking down various data considerations such as format, quality, information on members’ marital status and dependants, and experience data, the last pertaining to “historic deaths” and “other member movements”.
Additionally, it sets out what is considered best practice in creating benefit specifications, cash flow checks, residual risks and the compiling of asset data.
Amrit Mclean, head of pensions and derisking at DLA Piper, said: “This remarkable industry continues to thrive and will only get busier. We know all insurers are keen to quote on and to write as many deals as possible.
“This guide is a first step in making the whole quotes process more efficient for the entire industry. We look forward to working with the insurers on further updates to the guide over the coming months and years as the industry continues to evolve and innovate.”
