Total pension scheme buy-in and buy-out volumes hit £27.7 billion in 2021, the third-biggest year on record, according to Hymans Robertson.
A total of £27.7bn was confirmed across around 100 transactions during 2021, with buy-ins accounting for 75 per cent of the total and buy-outs accounting for the remaining 25 per cent. Following a poor start to the year, the second half of 2021 saw £20.9 billion in buy-ins and buy-outs, the second biggest amount ever for a six-month period ending on 31st December.
2021 was a profitable year for defined benefit (DB) pension schemes wishing to transfer risk to the insurance market, according to Hymans Robertson. In the second half of 2021, a constant increase in demand for small and medium-sized deals, as well as transactions worth more than £1bn for Metalbox, Imperial Brands, and Gallaher, generated a busy period for buy-ins and buy-outs.
Hymans Robertson head of risk transfer James Mullins says: “A quiet start to 2021, combined with increased innovation in the longevity hedging space for non-pensioner members, led to some very attractive buy-in and buy-out pricing for DB pension schemes who approached the market during 2021. Most of the insurers were behind their targets by mid-2021 and this created particularly strong competition in the second half of the year. This was a key reason why the second half of 2021 was the second busiest ever six-month period for buy-ins and buy-outs.
“The rapid growth in demand for pension schemes to insure their risks, along with improved pension scheme funding levels, attractive insurer pricing and new alternative risk transfer options, means that we expect around £50bn a year of buy-ins and buy-outs on average over the next 10 years. That means that, by the end of 2031, £1 trillion of pension scheme liabilities will have been insured, covering 5 million members’ benefits.”