With only six weeks left until the middle of the year, only around £2bn of buy-ins and buy-outs have been publicly announced. Even allowing for transactions that are not in the public domain, this is significantly lower than the £12.6bn (£17.6bn) of total buy-ins and buy-outs that were completed in the first half of 2020 (2019).
Insurers have generally set themselves targets for the year based on much higher transaction volumes. This quieter start to the year therefore presents an excellent landscape for pension schemes looking to complete buy-ins before the end of 2021. There are likely to be particular opportunities for pension schemes that are well prepared and able to approach the insurance companies for buy-in quotations over the next few months.
James Mullins, head of risk transfer at Hymans Robertson comments:“The buy-in/out market has grown considerably over the last few years and is widely expected to continue to grow. Insurers’ business projections and planning reflects this trend and they will be very keen to hit their 2021 targets. The quieter start to the year means that there will be strong price competition. A good illustration of this is that, for the first time in years, we have seen all eight insurers eager to quote and compete against each other for the same mid-sized buy-in transactions. This has led to highly competitive pricing and great outcome for the pension schemes.”
“Insurers have been asking the leading consultants in this market why we believe there has been a quieter spell. My own view is that this is just a hangover from a very busy spell of activity and it is not a result of lockdown nor a sign of reduced appetite. Indeed, trustees and sponsoring employers have adapted excellently to home working and market conditions have been very favourable to pension schemes during 2021.”
“Following the recent rise in long-term interest rates and positive performance from growth assets, we are already seeing more pension schemes now approaching the insurers for quotations and so I expect that the second half of 2021 will be a busy period. However, the quiet start to the year, means that I expect buy-in pricing opportunities will remain for many pension schemes during 2021. If a pension scheme has already planned a buy-in over the next year, then there is likely to be value in accelerating the process to aim to capture this opportunity.”
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