UK pension consultants suggest that while large deals over £1bn (€1.2bn) have become ‘business as usual’, there is significant momentum and opportunity for smaller pension schemes in the bulk purchase annuity (BPA) market in 2025.
While the total number of BPA transactions for 2024 has not yet been confirmed as insurers complete their financial statements, several predictions are currently floating about.
Aon predicts the market will close between £45bn and £50bn, WTW expects under £60bn in transactions, while XPS Group said early indications suggest £48bn of new business written over 2024.
Forecasts for 2025 also differ among consultants. LCP forecasts another £40-50bn in 2025, while WTW predicts total transactions could reach £70bn — £50bn in BPAs and £20bn in longevity swaps.
Mike Edwards, partner in Aon’s UK risk-settlement team, said that deals over £1bn have become “business as usual” with size no longer viewed by insurers as a particular challenge.
This year the market has seen a number of mega deals including a potential £11bn Natwest transaction, a £1.8bn buy-in deal between the G2S pension and Just, a £1.5bn transaction between Compass Group and Standard Life, and a £1.7bn deal between the National Grid Electricity Group of the Electricity Supply pension scheme and Aviva.
However, Edwards pointed out that various market changes over the course of last year benefitted smaller to mid-sized schemes, dispelling any myths that the market was only open to mega schemes.
The previous year saw new entrants Royal London and Utmost complete their first deals below £100m and most of the established BPA insurers expand their offerings at the smaller end of the market to give better service via streamlined processes.
In December, the Pension Insurance Corporation (PIC) announced its first transaction under ‘Mosaic’, its new streamlined solution for small schemes. This was a £20m deal with the General Council of the Bar Pension and Life Insurance Fund.
Just Group completed 129 sub-£100m transactions in 2024 – a record for any single insurer in a calendar year, according to XPS.
Meanwhile, Aon has led advice on transactions under £100m in size with six different insurers in 2024, showing “clear evidence” of the level of competition going into this year.
Chris Rice, head of trustee services at Broadstone, pointed out that a total of 15 BPA transactions were completed, covering 1,365 members, including six transactions in a four-week period during October alone.
All of the transactions were less than £50m in premium size with volumes reaching a total of £185m and followed a mixture of competitive and exclusive processes, demonstrating an increasing appetite for smaller transactions from insurers.
Rice expects this momentum to continue to build.
He said: “As we start 2025, we expect steady growth in the number of transactions for smaller schemes compared to last year with more insurers interested in smaller deals, combined with competitive pricing. Trustees and sponsors of small schemes can be confident of a successful transaction, if properly prepared.”
Aon, WTW, LCP and XPS expect at least one more entrant in 2025 with Brookfield currently seeking regulatory approvals
Shelly Beard, managing director in WTW’s pension transactions team, added that with new entrants expected as soon as Q1 2025, and the two new entrants in 2024, there is likely to be increased innovation and more choice and opportunities for smaller schemes in 2025.
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