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Bulk annuities topped £10bn in 2016

23 March 2017

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Pension buy-ins and buy-outs by UK pension schemes came to £10.2bn in 2016, according to consultants LCP.

The total includes the £1.2bn buy-in by Phoenix Life with its own UK pension plan, which was announced this week and is the largest single transaction for 2016.

Legal & General and Pension Insurance Corporation wrote the largest volumes of business with UK pension schemes at £3.3bn and £2.5bn respectively, a 33% and 25% market share.

Rothesay Life wrote no material pension business with UK pension plans during the year, focusing instead on its £6.4bn annuity transfer with Aegon.

The majority of bulk annuities were completed in the second half of the year, with a surge of activity occurring after the EU referendum.

This is the third consecutive year that volumes have exceeded £10bn and LCP predicted it will continue in 2017, potentially exceeding £15bn for the first time.

Charlie Finch, partner at LCP said: "We have continued to see an acceleration of de-risking activity by pension plans since the EU referendum."

"This has been driven by an increased desire to lock down pension risks, which have been highlighted by economic volatility and high-profile pension cases such as BHS."

Finch said a further driver is pensioner buy-in pricing being at its most favourable level for years.

"Following the introduction of Solvency II last year, insurers have innovated and, in a post EU referendum world, have been able to source attractively priced assets and pass back savings to pension plans through lower pricing," he said.

LCP was lead adviser on 12 out of the 24 buy-ins and buy-outs over £100m last year.

Since the EU referendum it completed 10 transactions over £100m helping clients to reduce risk.

"The £1.2bn buy-in by Phoenix Life is the largest of the many transactions in 2016 and the fourth largest pensioner buy-in ever after ICI Pension Fund, Total and the Civil Aviation Authority," said Finch.

The company predicts buy-in buy-out volumes in the first half of 2017 will exceed the first half of 2016,

First published 23.03.2017

Lindsay.sharman@wilmintonplc.com