Legal & General’s UK pension risk transfer business expects bulk annuity deal volumes to total £25bn this year, according to an update from the firm.
“We are now seeing a pronounced uptick in quote activity, with a healthy pipeline of larger transactions suggesting that the second half of the year will be very busy,” said Legal & General Retirement Institutional (LGRI) in a report today.
“As increasing numbers of companies look to us for help, pension plans who prepare diligently and have a clear set of objectives will put themselves in the best position in a busy market,” the firm added.
Around £5bn of bulk annuity transactions have been publicly declared so far this year. There have been no “jumbo” £1bn-plus deals, although a buy-in for Kingfisher Pension Scheme with Aviva and an assured payment policy for a Legal & General scheme were in the £900m bracket.
LGRI said additional competition in more saturated areas of the pension risk transfer market was being created by “a recent shift in the areas of the market that some insurers are participating in”.
The report also concluded that the pension risk transfer market is set to evolve in a beneficial way for pension plans considering risk mitigation solutions. If interest rates rise from their near-record lows, it said, unhedged plans will see their funding status improve as liabilities decrease, making the risk transfer market more attractive.
This, combined with the strong competitive dynamics between insurers, means pension plans with clear objectives will find numerous opportunities later this year to secure a competitive deal.