XPS research has found that more insurers are competing for small bulk annuity deals as pricing remains attractive for pension scheme sponsors.
Insurers are becoming “more active at the smaller end of the market”, according to Stephen Purves, head of risk settlement, and Adrian Marshall, senior risk settlement consultant.
In an update, the pair explained that good capacity in the insurance market coupled with dedicated services for pension schemes with less than £100m in assets was increasing opportunities for trustees.
Pricing for small schemes has also improved over the course of the past year, XPS data showed.
“XPS has seen a marked increase in competitive tension for transactions at the smaller end of the market… which we expect to continue during 2025,” Purves and Marshall wrote.
Just Group has reported that it completed 129 transactions in 2024, a record for a single insurer in a calendar year. Pension Insurance Corporation (PIC) and Aviva are among the insurers offering dedicated services to streamline small scheme transactions, and consultancy group Broadstone has a similar service.
A separate report from PwC, published last month, indicated that the rise in smaller transactions could mean that more than 300 deals could be completed in 2025.
PwC said there were six insurers with “strong” appetite for deals between £50m and £100m, with three showing the same for schemes with less than £50m in assets.
XPS’s Purves and Marshall added that “well-prepared schemes with well thought-out strategies continue to receive attractive pricing regardless of size”.
Royal London lands Lufthansa bulk annuities
Royal London has insured three pension schemes sponsored by German airline Lufthansa for £120m.
The deal was completed in January and secured all three schemes in one transaction, despite each having “unique features”, Royal London said in a press release.
Adolfo Aponte, managing director at Cardano, which advised on the deal, said: “We are very pleased to have supported the trustees of the three Lufthansa UK pension schemes to deliver a positive result for their members.
“This three-in-one transaction pushed the boundaries of what was thought possible in this segment of the market, demonstrating the value of buying in the schemes together.”
Beatrice Male, bulk annuity origination lead at Royal London, said the transaction “continues the momentum we were enjoying in 2024 and we look forward to welcoming more pension scheme trustees and their members to Royal London in the months ahead”.
The insurer said it was in exclusive talks with several other clients.
Compensation scheme’s pension fund buys in with PIC
The Financial Services Compensation Scheme (FSCS) has secured a £25m buy-in for its defined benefit pension fund with Pension Insurance Corporation (PIC).
The transaction secures the benefits of all 154 members, PIC said, including 37 pensioners and 117 deferred members. It was completed without the need for additional contributions from the employer.
The FSCS is the statutory compensation scheme for UK authorised financial services firms.
Capital Cranfield’s Giles Payne, who chairs the trustee board, praised the input of Broadstone, the lead adviser, and Arc Pensions Law. He said the two firms “guided us expertly through the issues raised, which meant we could confidently transact, safe in the knowledge nothing was left to chance”.
Christopher Rice, deal lead and scheme actuary at Broadstone, highlighted the scheme’s “thorough preparation” as key to the success of the deal.
Richard Quintian, head of pricing and funded reinsurance at PIC, added: “Being well prepared when approaching a busy market allowed the trustees and their advisers to complete the process in an efficient and timely manner.”
