Bulk annuity market: Q4 trustee update
Bulk annuity market: Q4 trustee update
29 Oct 2024
The market continues to be busy with the number of deals in H1 hitting record highs. Overall premiums were lower than expected as a result of a large number of smaller transactions driving overall market activity. As anticipated, H2 is bringing the larger volume transactions, with the XPS-led £1.5bn Michelin Pension and Life Assurance Plan being the largest transaction announced so far this year.
We have also seen continued activity in the smaller end of the market with the ongoing development of streamlined solutions and some of the newer entrants also breaking into this space.
Download our PDF below, or read further, to explore our Risk Settlement Watch insight.
Market commentary
- The insurers continue to be busy, with lots of demand in the market.
- Full H1 2024 numbers have now been released which shows that whilst overall premiums written were lower than expected, the actual number of transactions (c.130) was higher than previous years. This is a result of a large number of smaller transactions driving overall market activity.
- H2 2024 has continued the trend of previous years with larger deals transacting, including the XPS-led £1.5bn transaction for the Michelin Pension and Life Assurance Plan, the largest publicly announced transaction in the market at the time of writing.
Notable deals in the last quarter in the public domain included:
| Michelin Pension and Life Assurance Plan | £1.5bn | Aviva |
| Coats UK Pension Scheme | £1.3bn | PIC |
| SCA UK Pension Plan | £1.1bn | L&G |
Pricing levels
XPS closely tracks pricing through pricing feeds from insurers and real-life transaction pricing across deals of all sizes. Average pricing over the past 24 months (relative to gilt yields) is illustrated below:
Funding, investment and other news
Falls in gilt yields and equity markets early in September had reversed by the end of the month, leaving aggregate funding levels broadly unchanged and remaining relatively stable at historically high levels. See XPS DB:UK Funding Tracker below:
Illiquid assets (XPS Xchange)
XPS launched a new proposition, XPS Xchange, to enable schemes to access a wider range of buyers and sellers of illiquid assets, which is often needed to help facilitate buy-in and buyout transactions. Many of our schemes have already benefited from improved pricing when selling illiquid assets through the XPS Xchange platform. Read our press release here.
Bulk Annuity Outlook for 2025
XPS market intelligence – insurers generally continue to be selective due to increased market demand, with significant demand already building for Q1 2025.
However, while overall deal numbers may be up on last year, it’s looking likely that expected transaction volumes likely to complete in 2024 may be less than 2023, which may present some attractive pricing opportunities towards the year-end.
XPS’s experience remains that well-prepared schemes with well thought-out strategies continue to receive attractive pricing regardless of size.
Sub-£100m transactions – insurers, including some of the new entrants, continue to be active at the smaller end of the market, with new propositions and capacity available helping pension schemes attain competitive pricing. Royal London has also confirmed its first external bulk annuity transaction for a c.£30m pension scheme, signalling some increased competition for transactions at this end of the market. We are expecting to see some good opportunities for smaller schemes in H1 2025.
For further information, please get in touch with Stephen Purves, Adrian Marshall or speak to your usual XPS Group contact