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Buy-in and buy-out volumes almost double in first half of 2017

10 August 2017

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UK pension schemes completed £5.1bn of pension buy-ins and buy-outs in the first half of 2017 – an 88% increase on the same period last year.

The increase indicates that the acceleration of de-risking activity by schemes since the EU referendum in June 2016 is showing no sign of slowing down.

Financial consultancy LCP has analysed insurer data for the first half of this year.

LCP partner Charlie Finch, said: "2017 has got off to a strong start with buy-in buy-out volumes almost doubling with around £12.5bn written in the past 12 months."

Finch said pricing has remained 'keen', driven by a high level of competition, especially buy-ins over £100m, with eight insurers actively participating following Phoenix Life's entry to the market.

LCP's analysis of the data found that Pension Insurance Corporation (PIC) wrote 37% (£1.9bn) of all business in the first half of 2017.

PIC specialises in securing the liabilities of Defined Benefit (DB) pension schemes.

The next highest market volumes were from Legal and General, with 30% (£1.5bn) of business.

Last year L&G wrote the largest volume of buy-ins and buy-outs with 33% market share, followed by PIC on 25%.

This year has also seen a record number of mid-sized bulk annuity deals, with fourteen transactions between £100m and £1bn – this compared to five in 2016 and seven in 2015.

The largest transaction was an unnamed £690m pensioner buy-in with PIC, while the largest named transactions are a £270m full buy-out for Tullett Prebon with Rothesay Life, a £250m pensioner buy-in by Cancer Research with Canada Life, and a £200m pensioner buy-in by 3i with PIC.

LCP predicts the trend will continue in the second half of the year.

Finch said: "2017 is well on track to exceed £10bn of buy-ins and buy-outs for the fourth year running, and has the potential to exceed the record £13.2bn set in 2014."

"There remains significant capacity and competition, even if a large back-book comes to market – providing attractive opportunities for pension plans to transfer longevity risk through a buy-in or buy-out."

First published 10.08.2017

Lindsay.sharman@wilmingtonplc.com