The mutual insurance and investment group is first of two predicted new entrants to the pension insurance sector.
Royal London has entered the bulk annuity market through two deals with its own defined benefit (DB) pension schemes worth approximately £650m.
The mutual company announced in its 2023 annual results, released on Friday, that it had “extended our annuity capabilities in advance of an intended participation in the bulk purchase annuities market, focused on providing a competitive solution to the trustees of defined benefit pension schemes”.
Royal London has insured all benefits for the Royal Liver Assurance Limited Superannuation Fund, a scheme it acquired in 2011 when the company bought Royal Liver Assurance. As of the end of December 2023, this amounted to £254m, according to Royal London’s annual report.
The group has also insured approximately 20% of its own DB scheme, the £2bn Royal London Group Pension Scheme. A letter to members of the scheme dated 28 February 2024 stated that the buy-in was secured in January this year. Based on assets under management on 31 December 2023, the buy-in is worth approximately £400m.
Royal London’s entry into the bulk annuity market brings the number of active insurers in the space to 10, following M&G’s re-entry into the sector last year.
Earlier this year, consultancies Hymans Robertson and LCP have both predicted that there will be two new entrants into the bulk annuity market this year.
Charlie Finch, partner at LCP, has previously said his firm was in discussions with six potential providers considering entering the pension insurance market. This could boost competition with positive effects for pricing from a pension scheme perspective, according to Finch.
Iain Pearce, head of alternative risk transfer at Hymans Robertson, said in January that trustees that spend time “considering whether and how to talk to new entrants are likely to get the most engagement”.
“They may also benefit from some motivated providers who are looking to get a foothold in the market,” Pearce said. “This ‘early mover’ advantage could result in preferable contractual or commercial positions.”
