Smaller buy-ins drive record buy-in/out transaction numbers in H1

Written by Jack Gray

25/09/2024

Smaller pension scheme buy-in deals drove bulk annuity transaction numbers to record levels in the first half of 2024, according to analysis from LCP.

The consultancy found that 113 buy-in/out deals were completed by UK pension schemes in H1, an increase of almost 40% on H1 2023 and of 70% on H1 2022 transaction numbers.

This was driven by the number of smaller transactions of under £100m, which accounted for more than 80% of transactions by number in the first half of 2024, up from around 70% for the 2022 and 2023 financial years (FY).

Despite the record activity, the value of the bulk annuity transactions in H1 2024 was only the third highest H1 on record at £15.2bn, down from the record £21.1bn in the first half of 2023.

LCP said this reflected that there were only two transactions of £1bn or more in H1 2024, compared to five during the same period in 2023.

Rothesay wrote the largest bulk annuity volumes in H1 2024 with £4.2bn (27% market share), in addition to agreeing to acquire the £6bn Scottish Widows bulk annuity portfolio from Lloyds Banking Group.

Aviva, Legal & General, PIC and Standard Life have all reported that they exceeded £4bn of new business, including deals post half-year end and those in exclusivity.

LCP stated that it expected transaction volumes to accelerate in H2 2024, to be driven by a “flurry of giant transactions” of more than £1bn.

Insurers have already disclosed that they have written, or are exclusive on, a further £10bn of deals since the half-year point, and LCP expected deals of £1bn or more to reach double figures over the course of the year.

Two insurers, Aviva and Just, wrote over 70% of H1 2024 transactions by number, up from around 50% and 60% in FY 2022 and 2023 respectively.

Commenting on the findings, LCP partner, Charlie Finch, said: “[This year] has seen a staggering number of transactions in the first half of the year as we continue to see strong appetite from UK sponsors to remove defined benefit pension risk.

“Total disclosed buy-in/out volumes already exceed £25bn for 2024 and we expect the full year to reach over £40bn, which would make 2024 one of the biggest years on record.

“The insurers have responded strongly to the continued high demand, growing both their transaction capacity and target volumes.

"This additional capacity has led to aggressive insurer price competition on transactions over the summer with some of the best non-pensioner pricing ever.”

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