There has been a “quantum shift” in the number of bulk annuity transactions being carried out, with increased activity in 2022 reflecting the improved financial position of many DB schemes and a wider spread of insurers in they market.
In total there were £28bn of bulk annuity deals in 2022, covering over 200 separate transactions according to Mercer’s analysis of the latest data. It says this figure is a 33 per cent increase on the number of transactions in 2021, and the largest number of transaction in a single year over the last decade.
Mercer adds that compared to 2013, and the decade before, the market has changed significantly, with a much wider spread of insurers writing deals of all size. Prior to this date the vast majority of business came from one to two insurers writing up to 100 micro-transactions annually.
Aon has also looked at these figures in its UK Risk Settlement Market Update. It points out that 2022 was the fourth successive year that there has been more than £25bn of bulk annuity business written.
It says rising market yields reduced the value attributed to pension scheme transactions – and it say the market may have passed the £25bn mark if yields had remained at the level they started at in 2022.
In total Aon says that risk settlement volumes total £43.5bn — with bulk annuities accounting for almost £28bn of this total, and £15.7bn in disclosed longevity swaps.
It says demand for full scheme annuity transactions is increasing as the final salary pension scheme market matures and it says if market conditions remain favourable 2023 is likely to see a number of multi-billion-pound transactions that could push the bulk annuity market to a record volume.