Legal & General and Pension Insurance Corporation (PIC) wrote the largest volumes of business with UK pension plans at £3.3bn and £2.5bn respectively, a 33% and 25% market share. Rothesay Life focussed in 2016 on its £6.4bn annuity transfer with Aegon and wrote no material pension business with UK pension plans during the year.
This marks the third year in a row that volumes have exceeded £10bn. The majority – at £7.5bn – completed in the second half of 2016, highlighting the surge in activity following the EU referendum.
This high-level of activity has carried on into 2017 and, as predicted in LCP’s De-risking Report 2016 published in December, LCP continues to believe buy-in and buy-out volumes in 2017 could exceed £15bn for the first time.
Buy-in/buy-out volumes in the UK (£m)
LCP’s analysis of insurer data for 2016 reveals:
Including annuity transfers between insurers, total annuity business reached nearly £20bn following the transfer of Aegon’s £9bn legacy UK annuity book (£6bn was acquired by Rothesay Life and £3bn by Legal & General).
The largest volume insured by a single pension plan was £2.7bn by the ICI Pension Fund, split across five buy-ins in 2016 with Legal & General and Scottish Widows.
The largest single transactions were the £1.2bn buy-in by Phoenix Life and the £1.1bn full buy-out of a Rolls-Royce pension plan (Vickers) by Legal & General.
A record 24 transactions over £100m (2015: 19; 2014: 21), demonstrating that appetite from pension plans remained high.
Insurer appetite remains strong into 2017. Earlier this month, Canada Life wrote a £250m buy-in with Cancer Research, the largest transaction so far announced in 2017 and marking their entry into mid-sized transactions.
Commenting on the activity for 2016, Charlie Finch, partner at LCP said: “We have continued to see an acceleration of de-risking activity by pension plans since the EU referendum. This has been driven by an increased desire to lock down pension risks which have been highlighted by economic volatility and high-profile pension cases such as BHS. A further key driver has been that pensioner buy-in pricing has been at its most favourable level for five years relative to holding gilts.
“Following the introduction of Solvency II last year, insurers have innovated and, in a post EU referendum world, have been able to source attractively priced assets and pass back savings to pension plans through lower pricing. Since the EU referendum we have completed 10 transactions over £100m as we helped clients to reduce risk.
“The £1.2bn buy-in by Phoenix Life is the largest of the many transactions in 2016 and the fourth largest pensioner buy-in ever after ICI Pension Fund, Total and the Civil Aviation Authority.
“Looking forward over 2017, insurers are reporting strong pipelines. We expect buy-in and buy-out volumes for the first half of 2017 to significantly exceed those in the first half of 2016, now that Solvency II has bedded down. 2017 remains on track to set a new record of over £15bn of business.”
LCP was lead adviser on 12 out of the 24 buy-ins and buy-outs over £100m last year.
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