A poll of 140 trustees, consultants, and lawyers working in the bulk annuity market, by Pension Insurance Corporation plc (“PIC”), a specialist insurer of defined benefit pension schemes, showed that 47% expected the market to be between £50 billion and £60 billion next year. By contrast, 45% of respondents thought it would be between £40 billion and £50 billion.
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Delegates at PIC’s Annual Market Update, where the polling was conducted1, were also asked about other topical questions relating to defined benefit pension schemes:
1) Surplus release: 57% of those polled believe surplus should only be returned to the sponsor after buyout. Very few (3%) voted that trustees should give the surplus to the sponsor and re-risk the pension scheme to make up the difference.
2) The biggest challenges facing new entrants to the bulk annuity market: 63%, an overwhelming majority, voted for track record with trustees. Other answers were asset sourcing capability (16%), and pricing capability (13%).
3) The biggest impact on pricing levels in the next 12 months: 52% believed more large transactions taking up capacity would be the main issue, with 25% suggesting new entrants to the market, 18% suggesting funded reinsurance, and 5% Solvency UK.
There was also a panel discussion with PIC’s senior team on how and why social value is created as a beneficial outcome of PIC’s long-term investment in infrastructure and housing. Social value is created both during a project’s construction phase which, for example, typically sees the creation of hundreds of jobs as well as apprenticeships, and during the operational phase, which can lead to improved healthcare and wellbeing outcomes, the revitalisation of urban centres, and a more cohesive social fabric. The panellists also discussed the considerable amount of work PIC is doing with local authorities and other stakeholders to help bring forward enough viable urban regeneration projects to satisfy the considerable demand that PIC and other long-term investors have, as we seek the secure cashflows to back the pensions of our policyholders over future decades in a growing bulk annuity market.
Panellists also fielded questions about PIC’s progress on wider sustainability issues. This included a discussion about how PIC’s suppliers and counterparties are addressing sustainability concerns, as well as how PIC achieved a 28% decrease in the Weighted Carbon Intensity of our public credit investment portfolio from our 2019 baseline, already surpassing our 2025 reduction target of 25%.
Mitul Magudia, Chief Origination Officer at PIC, said: “We were delighted that such a strong cross-section of the industry were able to join us for our Annual Review of the Year. As the results of our polling show, the bulk annuity market is now firmly established as a £50 billion a year market. It’s worth noting that the market volume size range reflects the uncertainty about the timing of larger scheme transactions. One or two of these transactions in a year will likely push the market up to £60 billion. What is more important for PIC, however, is that we continue to offer a whole of market solution, capable of addressing the needs of small schemes right through to the very biggest.”
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