This year will bring a new defined benefit (DB) consolidator and another entrant to the bulk annuity market, according to consultancy group LCP.
Charlie Finch, partner at LCP, said the “superfund” consolidator market was likely to gain “at least” one new participant alongside Clara Pensions. He said the success of Clara and the prospect of additional regulation through the Pension Schemes Bill was “bringing superfunds more into the mainstream as an option for less well-funded pension schemes”.
Clara completed its first transaction involving a non-distressed pension scheme sponsor in December.
LCP also said it expected total bulk annuity volumes to reach between £40bn and £50bn again. With more insurers offering dedicated services for small pension schemes, the consultancy also predicted more than 300 transactions, which would be a record for a calendar year.
The consultancy group also predicted a further new entrant to the insurance market, following Utmost and Royal London completing their first transactions last year. US financial services giant Brookfield has been building up its capabilities in the UK with a view to entering the bulk annuity sector.
LCP said it expected these new entrants to keep pricing favourable for pension schemes, while trustee boards will focus on “non-pricing factors” such as digital functionality and sustainability when selecting insurers.
In addition, the consultancy forecast a 33% increase in scheme wind-ups as the high level of insurance activity over the past few years progresses.
