Bulk annuity update: L&G targets £65bn in new business by 2028

Legal & General (L&G) expects to write up to £65bn worth of bulk annuity business by the end of 2028, according to a business update.

This week, the financial services giant unveiled a restructuring plan that included merging its asset management and private capital businesses into a single investment unit.

It also highlighted the bulk annuity market as a key area of growth in the UK and other jurisdictions.

In its update, L&G said its Institutional Retirement arm was “well placed to seize the significant... opportunity” in this market.

“The addressable market is significant – only 10% of the £6.6trn of defined benefit pension assets in the UK, the US, Canada and the Netherlands have so far transferred to insurers,” L&G said.

“In the UK, where we are the market leader, volumes are expected to average £45bn per annum over the next decade, up from £25bn per annum since 2018.

“Internationally, we have an established position in the US and are growing in Canada and exploring our partner model in the Netherlands. We will continue to pursue a disciplined approach to profitable growth in these markets.”

By the 2028 financial year, the insurer said it was aiming to write new bulk annuity business worth between £50bn and £65bn, while growing the operating profit from its Institutional Retirement business by 5-7% a year.

Medical Protection Society completes £125m buy-in

Rothesay has completed a £125m full scheme buy-in with the MPS Pension Scheme, which is sponsored by The Medical Protection Society, a not-for-profit organisation serving doctors, dentists and healthcare professionals.

The buy-in secures the benefits of all 618 scheme members, including 174 pensioners and dependants, and 444 deferred members.

Zedra Governance's Colin Richardson, sole trustee for the scheme, also highlighted the importance of preparation, which helped the scheme secure several quotes in a competitive market.

Tom Ridley, senior deal manager at Isio, one of the advisers on the transaction, added: “It was also pleasing to see such high levels of insurer engagement in a busy market, with over half of all insurers providing a quotation, demonstrating the continued attractiveness of mid-sized schemes that set clear objectives.”

Richard Pile, chief financial officer at The Medical Protection Society, said: “Given improved funding levels and the hard work we put in to preparing the scheme for its endgame, we were able to work quickly with all parties to achieve a great outcome in a busy market.”

Katie Overton, a member of the business development team at Rothesay, said the MPS scheme was well prepared, helping to ensure a “quick and efficient” transaction.

“Following a busy first quarter this year, Rothesay continues to see very strong momentum in the pension risk transfer market with an unprecedented pipeline of new business,” Overton added. “Our substantial capital resources and proven execution capabilities mean we are very well-placed to capitalise on the significant opportunities we are seeing.”

Cartwright, K3 help unnamed schemes complete £85m buy-in

K3 Advisory and Cartwright have partnered to secure an £85m buy-in with Canada Life for two unidentified pension schemes. The deal secured the benefits for 189 pensioners and 87 deferred members.

Thomas Crawshaw, senior actuarial consultant at K3, said the deal was only possible due to the employer committing to deficit recovery contributions.

He explained: “We wanted to avoid a traditional deferred premium structure, which can be offputting to some insurers and is relatively expensive in the current climate. Therefore, we devised an innovative method that allowed the transaction to proceed without needing to defer the premium.

“In doing so we were able to ensure the transaction went through smoothly and member benefits were secured. A very satisfying outcome and, we believe, a market first.”

Sam Roberts, director of investment consulting at Cartwright, added that the arrangement gave “a clear runway” to the scheme's wind up, while also allowing the scheme to address the sale of some illiquid assets.

“A vanilla approach quite simply would not have worked in this case,” Roberts said. “In fact, the solution is so good that future recovery plan contributions for the larger scheme are being put into an escrow account in anticipation of being returned to the sponsor once the schemes have wound up.”

Linda Gilhooly, head of business development at Canada life, said the solution helped address issues that “can sometimes make things more problematic” for insurers.