Activity could increase in the second half of the year but is still likely to result in lower volumes than in 2023.
Despite some consultancies predicting another bumper year for the pension insurance sector, activity has been muted in the first six months – but the second half of 2024 could see activity increase again.
Total transaction volumes for 2024 could be lower than the £49.1bn total for 2023, XPS said.
However, the consultancy added that this may present some attractive pricing opportunities towards the end of the year, as well-prepared schemes with well thought-out strategies will continue to receive attractive pricing regardless of size.
Harry Harper, risk settlement partner at XPS, told Pensions Expert: “The bulk annuity market in the first half of 2024 has been dominated by a lot of small scheme transactions. In terms of the number of deals, it appears the bulk annuity market has been busier in 2024 than it was in 2023 and is likely the busiest ever.
“On the other hand, there has been a distinct lack of large deals so far in 2024... There may be another one or two unannounced but, either way, it looks like the total premium volume transacted in the first half of 2024 is perhaps only about half the £20bn that was transacted in the first half of 2023.”
Harper added that XPS knew of “quite a few” larger schemes looking to transact later in the year. If some of the largest in this group can secure a deal by the end of 2024, it could push the year’s total past that of 2023, he said.
“Either way, 2024 is still likely to be a record year for the bulk annuity industry, but possibly only in terms of a huge number of transactions, rather than the total amount of pension scheme money moving to insurers,” Harper said.
Small scheme business booms
This year has been more positive for smaller bulk annuity transactions, according to Paula Haughton, senior actuarial consultant at Hymans Robertson.
Haughton said existing insurers and new entrants were focusing on this part of the market to bring additional capacity.
“Each of the new entrants have different business models, with each bringing something different to the market, which we think will be good for the market and innovation and help meet demand more generally,” she added.
XPS’ data showed that 2023 was a record year for transaction volumes, with around £49.1bn of business written. This compared to £27.8bn in 2022 and £28.6bn in 2021.
The number of transactions in 2023 was 227, compared to 202 in 2022 and 156 in 2021.
Data collated by Pensions Expert shows that at least 24 deals worth less than £100m have been announced this year, involving insurers including Just Group, Aviva, Canada Life and Legal & General (L&G).
At the other end of the scale, Pension Insurance Corporation secured the year’s biggest deal so far, insuring the Total EnergiesUK Pension Plan for £1.2bn.
Other large deals include L&G insuring the SCA UK Pension Plan for £1.1bn, Standard Life’s £880m transaction with the Rolls-Royce & Bentley Pension Scheme, and L&G’s £900m buy-in with the ICI Pension Fund.
Further reading
Brookfield and Utmost to enter bulk annuity market (8 July 2024)
How schemes are solving illiquid assets issues (20 May 2024)
The changing face of bulk annuities (19 February 2024)
