As de-risking demand continues to grow, driven in part by recent improvements in scheme funding levels, trustee and company appetite to insure and ultimately settle costly legacy pension liabilities via bulk annuity transactions is on the rise. Recognising that volatility in bulk annuity prices is a permanent feature, JLT has created a service which enables schemes to be ‘in the market’, proactively monitoring insurers’ quotes in order to spot the best pricing.
Schemes using JLT’s buyout comparison service will receive actual quotations, rather than proxy buyout prices on a regular basis, allowing them to expedite the process towards locking into a bulk annuity contract.
Traditionally, trustees have submitted scheme data and benefits in bespoke formats, with insurers pricing from scratch in a manually intensive process. Insurer overheads meant that trustees received quotes from fewer insurers and did not receive regular pricing, therefore missing out on opportunities. Against a backdrop of global monetary tightening, rising interest rates and an expected uptick in pricing volatility, improved oversight of pricing will enhance trustees’ ability to capture attractive opportunities as and when they arise.
Using JLT’s new service, companies and trustees can self-load anonymised member data to a secure online portal, which can then be shared with all insurers currently active in the bulk annuity marketplace in one streamlined data file. Removal of each scheme’s highly bespoke benefit specification, in particular, speeds up both data compilation and the pricing process. By delivering scheme data in a standardised, streamlined format, JLT’s service automates the process for insurers, enabling them to value multiple schemes without any reprogramming of their pricing systems and in turn to deliver more to clients.
As the market prepares for further technological and structural change, integrated buyout price monitoring, investment tracking and valuation technology mean it will now be far easier to track bulk annuity affordability against technical provisions, accounting liabilities and asset values.
Harry Harper, Director and Head of Buyouts, JLT Employee Benefits, comments: “A key limiting factor for the parties involved in the bulk annuity market to date has been insurer man-power and bulk annuity adviser time-cost. With more schemes coming to market, the existing model was becoming inefficient, giving rise to a situation where schemes received less quotes, paid higher prices and could not update quotations regularly, to the detriment of all market participants.
“By allowing schemes to access regular ‘real’ pricing, companies and trustees using our service will be able to spot when insurer pricing has improved and can transact immediately to capture the pricing opportunity. For our clients, improved automation means better information, more quotations and less chance of missing opportunities.
“Allowing any UK scheme to self-load their own data and receive prices is fundamental and illustrates the scale of ambition for the new system.”
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